Merger News Lifts Stocks
U.S. stocks scored broad gains Monday even though late profit taking trimmed the advance. The market was aided a flurry of merger and acquisition activity.
On Monday, the 30-stock Dow Jones industrial average finished higher by 124.17 points, or 1.28%, at 9,789.36. The broad Standard & Poor's 500-stock index was up 18.60 points, or 1.78%, at 1,062.98. The tech-heavy Nasdaq composite index gained 39.82 points, or 1.90%, to 2,130.74.
On the New York Stock Exchange, 23 stocks were higher in price for every six that declined. Breadth on the Nasdaq was 19-6 positive. Trading was slow on the Yom Kippur religious holiday, notes S&P MarketScope.
Treasuries soared even though stocks advanced. The dollar index was higher. Gold futures fell. Crude oil futures were higher.
A number of big-name companies announced deals.Xerox (XRX) agreed to purchase Affiliated Computer Services (ACS). Abbott Laboratories (ABT) announced plans plans to purchase the pharma unit of Belgium's Solvay. Johnson & Johnson (JNJ) boosted its stake in Dutch biotech firm Crucell as well.
The financial, basic materials, and oil & gas sectors were among the market leaders.
Investors are apparently acting on the perception that third- and fourth-quarter earnings will be stronger-than-expected in a clear sign the recession is over and the economic recovery is at hand, says S&P MarketScope.
Wall Street also weighed a Wall Street Journal report Monday that $35 billion in support of state and local housing agencies will be committed by the White House to provide mortgages to low-income earners.
There were no significant economic reports released Monday. Traders were awaiting Tuesday's reports on the August S&P/Case-Shiller 20-city home price index and the Conference Board's September consumer confidence Index.
Later in the week, Wall Street will get news on the health of the recovery with the final second-quarter U.S. gross domestic product (GDP) revision Wednesday, which S&P sees down 1.3% vs. the 1.0% drop reported in the preliminary reading.
On Thursday, personal consumption expenditures for August are expected to rise 1.0% and weekly initial jobless claims are seen remaining unchanged at 530,000.
The main event, data-wise, will be the releases of the September employment report on Friday. S&P sees nonfarm payrolls down 160,000 on the month, vs. a decline of 216,000 in August.
In company news Monday, Xerox agreed to purchase Affiliated Computer Services in a cash and stock deal valued at $63.11 per ACS share, or $6.4 billion.
Abbott Labs agreed to acquire Belgium's Solvay Group's pharmaceuticals business for €4.5 billion ($6.6 billion) in cash. The acquisition also includes full global rights to the fenofibrate franchise, and Solvay's vaccines business. Currently Abbott has U.S. rights to fenofibrate and pays royalties to Solvay.
Gentek Inc. (GETI) agreed to be acquired by ASP GT Acquisition Corp., a wholly-owned unit of American Securities LLC, in a deal valued at $673 million, or $38 per share in cash.
Aspect Medical Systems (ASPM) agreed to be acquired by a wholly-owned subsidiary of Covidien (COV) for $12.00 in cash per Aspect share for a total of about $210 million, net of cash and short-term investments acquired.
Pomeroy IT Solutions (PMRY) agreed to be acquired by affiliates of private equity firm Platinum Equity, for $6.50 per share. Pomeroy also announced that it has terminated its previously announced merger agreement with Hebron LLC, Desert Mountain Acquisition Co., and David B. Pomeroy, II.