Stocks move higher on takeover excitement
NEW YORK » Wall Street stocks surged yesterday, pushing up the Dow Jones industrials by more than 100 points as a report that two companies are trying to buy Alcoa Inc. stoked investors' hopes for a pickup in takeover activity.
Australia-based mining companies BHP Billiton Ltd. and Rio Tinto PLC are each planning to offer $40 billion for the aluminum producer, according to the Times of London.
The report came amid Hindalco Industries Ltd.'s $3.6 billion offer to buy Canadian aluminum maker Novelis Inc., and drugstore operator CVS Corp.'s move to bump up the value of its proposed purchase of Caremark Rx Inc.
Investors were also encouraged by rebounding oil prices, an upgrade of General Motors Corp., and a stock buyback by 3M.
Analysts cautioned, though, that yesterday's rally followed three straight days of drops in the Dow, and that recent earnings reports have been mixed. Futhermore, Federal Reserve Chairman Ben Bernanke could hint in his testimony to Congress today, as many Fed officials did last week, that rising inflation might compel policy makers to hike interest rates -- a move that could hurt consumer spending.
"The optimists are lifting their heads today despite all the pessimism in the market right now," said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. "They're making the bet that his comments will be benign, rather than scary and hawkish."
The Dow climbed 102.30, or 0.81 percent, to 12,654.85. It was the biggest one-day jump since Dec. 27.
Broader stock indicators also rose. The Standard & Poor's 500 index increased 10.89, or 0.76 percent, to 1,444.26, and the Nasdaq composite index rose 9.50, or 0.39 percent, to 2,459.88.
The Russell 2000 index of smaller companies rose 6.74, or 0.84 percent, to 812.53.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where consolidated volume came to 2.64 billion shares, compared to 2.82 billion at the same point Monday.
Overseas, Japan's Nikkei stock average rose 0.67 percent, hitting its highest level in more than six years.
Bonds were little changed, despite the U.S. Commerce Department's report that the trade deficit grew more than expected in December, pushing the gap to its fifth consecutive annual record in 2006.
The yield on the benchmark 10-year Treasury note was at 4.81 percent late yesterday, the same as late Monday.
The dollar was lower against other major currencies, while gold prices edged slightly higher.
Oil prices rose $1.29 to settle at $59.06 a barrel yesterday after the International Energy Agency predicted a sharp rise in global demand in 2007.