Stocks Extend Rally for Third Session as Oil Falls
Stocks extended their advance into a third session Monday on news of dropping oil prices and a bevy of corporate mergers.
Oil prices fell for the third straight day after Hurricane Dennis missed key Gulf of Mexico refineries, averting a disruption in fuel supplies. Wall Street has been nervously watching oil prices, worried that further increases would curb consumer spending and chip away at corporate profits.
Crude oil for August delivery fell 71 cents to $58.92 a barrel in New York futures trading.
News of corporate deals in telecom, banking and pharmaceuticals boosted stocks too, stoking investors’ hopes that second-quarter earnings might be stronger than expected. Investors welcomed the deals as a sign that companies feel secure enough to spend some of the cash they accumulated over the last two years amid a profit boom. Companies in the Standard & Poor’s 500 index have the largest cash reserves in the index’s history.
The S&P; rose 7.58 points, or 0.6%, to 1,219.44, nearing the 3 1/2 -year closing high of 1,225.31 set on March 7.
The Dow Jones industrial average rallied 70.58 points, or 0.7%, to 10,519.72. The Dow jumped 146.85 points Friday.
The Nasdaq composite gained 22.55 points, or 1.1%, to 2,135.43, highest since Jan. 3.
Advancers led decliners by more than 2 to 1 on the New York Stock Exchange and on Nasdaq.
Indexes of small and mid-size stocks hit record highs for a second consecutive session. The Russell 2,000 index of smaller issues jumped 9.60 points, or 1.4%, to a record 671.74.
Monday’s deal talk included a report that Goldman Sachs Group and German financial giant Allianz are discussing the purchase of a $1-billion-plus stake in one of China’s largest state-owned banks. Goldman Sachs rose $1.66 to $107.31, and Allianz rose 21 cents to $11.99.
Also, drug distributor McKesson said it would buy a smaller regional distributor, D&K; Healthcare Resources. McKesson rose 66 cents to $45.21 and D&K; shot up $5.80 to $14.30.
In another deal, Dutch media company VNU said it would buy U.S.-based healthcare data provider IMS Health in a cash-and-stock deal valued at more than $6 billion. IMS rose 61 cents to $26.50.
Sprint rose 7 cents to $25.45 after it said it would acquire U.S. Unwired for $1 billion plus $266 million in debt. U.S. Unwired, which provides Sprint PCS cellular services in nine states, is valued at $6.25 a share in the agreement. U.S. Unwired rose 4 cents to $6.20.
Merger activity lifted the market’s mood, but investors are also buying for fundamental reasons, said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. “People are underinvested and interest rates are relatively low,” he said.
In other market highlights:
* Home builders rallied anew on optimism about the industry’s earnings outlook. Toll Bros. gained $1.98 to $53.96, KB Home jumped $2.07 to $81.30 and Centex was up $2.04 to $76.21.
Also, Newport Beach-based William Lyon Homes soared $14 to a record $112.50. Brokerage JMP Securities in San Francisco said it began coverage of the stock with a “strong buy” rating and a $144 price target.
* Industrial shares were strong. GM rose $1.12 to $35.80, Caterpillar jumped $1.27 to $99.97 and copper miner Phelps Dodge was up $1.88 to $99.50.
* Marvel Enterprises gained $2.23 to $21.46 after “Fantastic Four,” a movie based on its comic book superheroes, turned in a better-than-expected performance at the box office.
* Palo Alto-based Agilent Technologies gained $1.33, or 5.5%, to $25.67. A partnership of buyout firms Kohlberg Kravis Roberts and Silver Lake Partners is the leading bidder to buy Agilent’s semiconductor-products unit for as much as $2.5 billion, the Wall Street Journal reported. Agilent and the buyout companies declined comment.
* EBay jumped $1.05 to $35.55 after adding a Chinese site for its PayPal payments service.
* Treasury bond yields inched up as gains in stocks reinforced fears that a three-month rally in bonds may have finally run its course. Bond yields rise as their prices fall. The yield on the 10-year T-note rose to 4.10%, from 4.09% on Friday.
