Stocks advance sharply as third quarter begins
NEW YORK » Wall Street soared yesterday in the first day of trading for the third quarter, boosted by a decline in Treasury yields, a rise in June manufacturing activity and a spate of buyout news.
The Dow Jones industrial average gained more than 120 points after the Institute for Supply Management's June manufacturing index came in at 56.0, slightly higher than the market expected and indicating stronger expansion than May's reading of 55.0. The report also showed a decrease in its prices paid index, suggesting inflation pressures lifted a bit last month and easing some worries about the Federal Reserve's interest rate policy.
Meanwhile, the 10-year Treasury note's yield fell below 5 percent from 5.03 percent late Friday, dampened as investors flocked to the safe-haven assets amid ongoing jitters about subprime lending. .
Investors were also enthusiastic about new takeover activity, involving such targets as Canadian telecommunications company BCE Inc., rural wireless provider Dobson Communications Corp. and British telecommunications company Virgin Media Inc.
"There's favorable economic news and continuing merger talk. That's a pretty good recipe for the market," said Stuart Schweitzer, managing director and global markets strategist for JPMorgan Private Bank.
The Dow rose 126.81, or 0.95 percent, to 13,535.43.
Broader stock indicators also rose. The Standard & Poor's 500 index gained 16.08, or 1.07 percent, to 1,519.43, and the Nasdaq composite index jumped 29.07, or 1.12 percent, to 2,632.30.
The Russell 2000 index of smaller companies rose 11.36, or 1.36 percent, to 845.06.
Crude oil futures on the New York Mercantile Exchange initially fell yesterday, but then rebounded to rise 41 cents to $71.09 a barrel -- closing above $71 for the first time in 10 months.
The dollar fell against most other major currencies, while gold prices rose.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to 2.50 billion shares, down from 3.10 billion shares Friday.
The combination of retreating yields and reports of fresh buyout activity gave some relief to investors who were worried about business slowing down due to high rates.
BCE rose $1.66, or 4.4 percent, to $39.45 after a $32.6 billion buyout offer over the weekend -- the biggest Canadian takeover ever -- from a consortium led by the Ontario Teachers Pension Plan Board.
The news followed AT&T's announcement Friday that it agreed to buy Dobson for $2.8 billion. Dobson rose $1.31, or 11.8 percent, to $12.40 yesterday, while AT&T rose 35 cents to $41.85.
Yesterday, Virgin Media confirmed it received a buyout offer, following reports that private equity firm the Carlyle Group bid more than $11 billion for the company. Virgin Media soared $4.30, or 17.6 percent, to $28.67.
Carlyle Group also made an offer for nursing home chain Manor Care Inc., valued at $4.9 billion. Manor Care slipped $1.19 to $64.10.
Two big pieces of data this week include the ISM's index of the service sector in June, to be released Thursday, and the U.S. Labor Department's jobs report, scheduled for Friday.