Stocks Get Lift From Fed News
Stocks rose sharply Monday, lifting the Dow Jones industrial average to its biggest one-day point gain in six months, after President Bush nominated Ben S. Bernanke to succeed Alan Greenspan as the Federal Reserve chairman.
Investor sentiment also got a boost from better-than-expected earnings and a drop in oil prices as Hurricane Wilma bypassed oil and gas platforms in the U.S. Gulf of Mexico.
Stocks already were advancing when news came that Bush picked Bernanke, chair of the president’s Council of Economic Advisors, to succeed Greenspan when he retires in January.
Meanwhile, upbeat profit reports at Merck and Schering-Plough eased earnings concerns prompted by Pfizer’s weak forecast last week. Encouraging results from American Express late in the day also lifted stocks.
At the close of trading, the Dow climbed 169.78 points, or 1.7%, to 10,385.00, its largest gain since a 206-point advance April 21.
Broader stock indicators also surged. The Standard & Poor’s 500 index was up 19.79 points, or 1.7%, at 1,199.38. The Nasdaq composite index jumped 33.62 points, or 1.6%, to 2,115.83.
Advancing issues outpaced decliners by more than 3 to 1 on the New York Stock Exchange.
Bond yields rose, reflecting falling prices. Traders worried that the Fed under Bernanke would be less concerned about the potential for inflation to accelerate, and so wouldn’t raise interest rates as much or as quickly. Inflation erodes the value of bonds’ fixed interest payments.
The yield on the benchmark 10-year note rose to 4.45%, from 4.38% on Friday.
Crude oil dropped to near three-month lows as Hurricane Wilma spared key production and refining facilities in the Gulf of Mexico. A barrel of light crude lost 31 cents to settle at $60.32 in New York trading.
With no new data to give investors clues about the economy’s health, Monday’s trading was influenced by the Fed announcement and by earnings reports.
Merck, a Dow component, rose 82 cents to $27 after its profit rose 7% because of lower costs and beat Wall Street views by 3 cents a share.
Rival Schering-Plough added 2 cents to $21.13 after its profit tripled in the third quarter from strong product sales, including the allergy drug Nasonex. Schering-Plough surpassed analysts’ expectations by 2 cents a share.
In other market highlights:
* Supermarket chain Albertsons climbed $1.19 to $25.25 after reports that it received bids from two groups of private equity firms and rival Kroger. Kohlberg Kravis Roberts, Texas Pacific Group and Apollo Management have formed one group to buy Albertsons, and Bain Capital, Thomas H. Lee Partners and Warburg Pincus have formed another, according to people familiar with the matter.
Kroger rose 27 cents to $20.07.
* An index of energy companies gained 3.3% for the best performance among 10 industry groups and its largest advance since July. Investors anticipate better-than-expected earnings reports this week from Exxon Mobil, Chevron and ConocoPhillips.
Exxon added $1.48 to $56.85 and was forecast to post record earnings. Chevron gained $1.53 to $57.83, and ConocoPhillips rallied $2.15 to $60.30.
* Cendant said it would split into four separate publicly traded companies. One company will run the Ramada and Howard Johnson hotel chains, another will take over Orbitz.com and other travel businesses, while the other two will operate its rental car and real estate units, respectively.
The stock opened higher but sank $1.32 to $18.77.
* American Express rose $2.39 to $49.54, after the company said quarterly profit grew 17%, thanks largely to growth in its domestic and international card businesses.
* Altria Group, the world’s largest cigarette maker, gained $1.09 to $74.06. The company could announce early next year that it is splitting into three companies, provided two pending legal decisions go its way, Barron’s said. Altria declined to comment.
* Unisys, a seller of computer-consulting services, was the worst performer in the S&P; 500 after saying the U.S. government had “issues” with a $1-billion contract. The stock tumbled $1.05, to $4.50.
