Buyout news gives a boost to stocks
Wall Street rose smartly in a quiet session Friday as investors adjusted positions ahead of a long holiday weekend and tried to determine whether a lackluster week heralded a departure from the market’s months-long run-up or merely a temporary pause.
Stocks advanced after a pullback Thursday and as investors drew some optimism from the Nasdaq Stock Market’s deal to acquire Swedish stock exchange operator OMX.
But investors showed little reaction to the National Assn. of Realtors’ report that sales of existing homes fell 2.6% in April to 5.99 million units, the slowest sales rate in almost four years.
Given Wall Street’s robust performance in recent months, a pullback this week in which investors consolidated gains wasn’t unexpected.
However, the week began with a flourish that could have been seen as suggesting further gains: The Standard & Poor’s 500 index traded above its record close for the first time in more than seven years.
But concerns over the continued strength of the market’s run and comments from former Federal Reserve Chairman Alan Greenspan about the possibility of a sharp pullback in Chinese stocks left some investors unnerved.
“It’s just a very, very wacky market,” said Ted Aronson, a partner at Aronson Johnson Ortiz, referring to the overall mood on Wall Street.
He says the implications of a still-settling housing market are difficult to quantify and give him pause, though he is still mostly bullish.
The Dow Jones industrial average rose 66.15 points, or 0.5%, to 13,507.28. The Dow had fallen in the previous four sessions.
Broader stock indicators also rose.
The Standard & Poor’s 500 index advanced 8.22 points, or 0.6%, to 1,515.73, and the Nasdaq composite index rose 19.27 points, or 0.8%, to 2,557.19.
For the week, the Dow industrials lost 0.4%, the S&P; 500 gave up 0.5% and the Nasdaq slipped 0.05%.
The yield on the benchmark 10-year Treasury note rose to 4.86%, from 4.84% on Thursday.
Crude oil futures rose $1.02 to $65.20 a barrel in New York trading.
Stocks rose Friday in part after Nasdaq announced its $3.67-billion deal. The move gives the stock market an entrance to Europe through OMX, which operates exchanges in seven Nordic countries.
It will become the world’s second trans-Atlantic exchange after the New York Stock Exchange bought Paris-based Euronext this year.
Nasdaq’s stock fell $1.14 to $32.84.
Buyouts have given a boost to stocks for much of the year. This week alone saw about $32.3 billion in deals, according to TrimTabs.
The market research group estimates that the roughly $270 billion in corporate buyouts announced so far in the second quarter are on pace to handily top the record $302.5 billion registered in the first quarter.
Friday’s gains came after Wall Street retreated Thursday after housing data that showed sales of new single-family homes surged in April by the largest amount in 14 years but as prices fell sharply.
Although a resilient housing market would probably be good for the economy, it could also reduce the likelihood the Federal Reserve would cut interest rates.
“I think the housing market has been on the top of everybody’s list of concerns, and now when you see some positives, a lot of investors are taking a step back and saying maybe things aren’t as bad,” said Steve Schoepke, vice president of research and product development at AIG SunAmerica Asset Management. “There is uncertainty about interest rates.”
In other market highlights:
* Retailer Gap fell 11 cents to $18.18 after reporting that its first-quarter profit fell 26%.
* Coca-Cola rose 65 cents to $51.89 after the beverage maker said it would acquire Vitaminwater maker Glaceau for $4.1 billion in a bid to expand its line of noncarbonated beverages.
* SourceForge said its third-quarter profit rose as a result of the sale of its enterprise software business. The stock jumped 59 cents to $4.32.
* Verigy jumped $5 to $29.63 after the Singapore maker of chip-testing equipment forecast stronger-than-expected sales.
* RF Micro Devices, which makes radio frequency components used in mobile devices, advanced 34 cents to $6.50 on an analyst upgrade.
