Stocks rally on M&A frenzy, factory growth
NEW YORK (Reuters) - Stocks rallied on Monday, the first day of the third quarter, boosted by a fresh round of takeover activity and data showing a pickup in manufacturing in June.
Caterpillar Inc. (CAT.N) and United Technologies Corp. (UTX.N) led the Dow industrials higher after a surprising rise in the Institute for Supply Management's factory index to its highest level in more than a year.
Takeover activity showed few signs of abating despite concerns about tightening credit. Canada's largest telephone company, BCE Inc. (BCE.TO)(BCE.N), agreed to a US$32.6 billion buyout.
"With interest rates going down a little bit, we'll likely see some more of these M&A deals," said Alan Lancz, president of Alan B. Lancz & Associates Inc., a Toledo, Ohio-based investment advisory firm.
The Dow Jones industrial average .DJI shot up 126.81 points, or 0.95 percent, to end at 13,535.43. The Standard & Poor's 500 Index .SPX climbed 16.08 points, or 1.07 percent, to finish at 1,519.43. The Nasdaq Composite Index .IXIC rose29.07 points, or 1.12 percent, to close at 2,632.30.
Trading was light on the New York Stock Exchange, with about 1.38 billion shares changing hands, well below last year's estimated daily average of 1.84 billion.
On the Nasdaq, about 1.84 billion shares traded, below last year's daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of nearly 4 to 1 on the NYSE and by almost 2 to 1 on Nasdaq.
The yield of the benchmark 10-year U.S. Treasury note dipped below 5 percent, further brightening the outlook for acquisitions that has fueled the spring rally in stocks. Lower interest rates make financing M&A transactions more feasible.
The benchmark 10-year U.S. Treasury note gained 8/32 in price, with the yield at 4.991 percent, the lowest level in more than four weeks.
Caterpillar's stock rose 2.8 percent to $80.45, while United Technologies gained 2.2 percent to $72.46, both in NYSE trading.
If completed, the buyout of Canada's BCE would be the world's largest, surpassing the still pending $31.8 billion buyout of Texas power company TXU Corp. TXU.N
U.S.-listed shares of BCE rose 4.4 percent to $39.45.
In other telecommunications deals, AT&T Inc. (T.N) said it will buy rural wireless communications services company Dobson Communications Corp. DCEL.O for $2.8 billion in cash. Dobson shares shot up 11.8 percent to $12.42 on the Nasdaq.
Shares of British cable operator Virgin Media Inc. (VMED.O) climbed 17.6 percent to $28.67 after the company said it had received a bid approach from an unnamed group. Virgin Media's stock ranked second among those contributing the most to the Nasdaq 100 index's .NDX gain. Continued...
