Stocks moved higher on Monday amid some merger news, positive economic reports, and month-end portfolio adjusting. However, gains were tempered ahead of Tuesday's Federal Reserve meeting on interest rate policy.
The Dow Jones industrial average rose 37.3 points, or 0.36%, to 10,440.07. The broader Standard & Poor's 500 index was up 8.6 points, or 0.72%, to 1,207.01. The tech-heavy Nasdaq composite index gained 30.42 points, or 1.46%, to 2,120.3.
Tuesday's Federal Reserve policy meeting is universally expected to result in a 25 basis point hike in the federal funds rate to 4%. The wording of the policy statement will be closely watched, as usual.
Action Economics sees only a few cosmetic changes with respect to Katrina in the Fed's statement. "With the markets looking for further hints on policy into the new year, changes to the now basic template could hamstring the new chairman, and we doubt Greenspan would want to do that," says Action Economics. "Hence, the wording is likely to largely confirm another 25 basis point hike on Dec. 13, which the markets have already priced in, and should leave the door open for another hike on Jan. 31."
Tuesday's release of the October ISM manufacturing index is expected to be a solid 57.5, vs. the stronger-than-expected reading of 59.4 in September, says Action Economics.
In merger news Monday, Barrick Gold (ABX) launched a bid to acquire all outstanding shares of Placer Dome (PDG) in deal valued at about $9.2 billion. The terms are $20.50 in cash or 0.7518 of ABX share plus $0.05 per share cash per Placer share.
Novartis agreed to acquire all Chiron (CHIR) shares it does not already own for $45 per share cash, or total of about $5.1 billion.
Saks (SKS) agreed to sell its Northern Department Store Group to Bon- Ton Stores (BONT) for $1.1 billion in cash plus assumption of about $85 million of liabilities, including about $35 million in capitalized leases.
On the earnings calendar, Valero Energy (VLO) said third-quarter earnings per share rose to $4.37, from $1.57 a year ago, on a 62% revenue rise. The energy company says the current $3.67 fourth-quarter consensus EPS estimate is significantly too low; it estimates that in October alone it will earn around $2.30 per share. The stock jumped on the news.
In economic news, U.S. personal income rebounded 1.7% and spending was up 0.5% in September. August income was revised to -0.9 from -0.1%; spending was left at -0.5%. The savings rate rose to -0.4 from a revised -1.8% ( previously -0.7%). The PCE deflator was up 3.8% year-over-year (from 2.9% in August) and the core was steady at 2.0% year-over-year.
The Chicago PMI rose to 62.9 in October, above the median forecast, with labor, order, price indices firm.
In the NYMEX energy markets, prices got hit on Monday, as warm temperatures are forecast for much of the U.S. over the next week or so, says Action Economics. December crude oil shed $1.46 to close at $59.76 a barrel.
Long-dated Treasury yields fell after the tame reading on core PCE prices. Oil prices moved lower. The 10-year yield falling to 4.56%,
European stock markets posted strong gains on Monday. London's Financial Times-Stock Exchange 100 index was up 103.9 points, or 1.99%, at 5,317.3.
Germany's DAX index jumped 103.43 points, or 2.14%, to 4,929.07. In Paris, the CAC 40 index gained 109.74 points, or 2.54%, to 4,436.45 in end of month window dressing and some hopes that the European economy will pick up steam, says Standard & Poor's MarketScope.
Asian markets finished higher on Monday. In Japan, the Nikkei 225 index jumped 259.96 points, or 1.95%, to 13,606.50. In Hong Kong, the Hang Seng index climbed 170.54 points, or 1.2%, to 14,386.37.