Stocks made a strong move higher yesterday as a new spate of merger activity and a surprising rise in home sales restored investors' confidence...
NEW YORK — Stocks made a strong move higher yesterday as a new spate of merger activity and a surprising rise in home sales restored investors’ confidence in the economy and eased fears of inflation and higher interest rates.
The Dow Jones industrial average rose 84.76 to 10,242.47.
Microsoft, one of the 30 Dow stocks, added 1 cent to close at $24.99 a share. Boeing, also a Dow stock, climbed $1.70 to $59.58 after it announced a deal to provide Air Canada with up to $6 billion worth of 777 and 787 Dreamliner planes.
Broader stock indicators also moved sharply higher. The Standard & Poor’s 500 index was up 9.98 at 1,162.10, and the Nasdaq composite index gained 18.59 to 1,950.78.
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The news of Valero Energy’s $8 billion takeover of oil refiner Premcor — creating the largest oil refiner in North America — reassured investors that corporate America still was willing to make large deals despite economic uncertainty.
A climb in home sales also lifted investors’ spirits, with the unexpected jump illustrating that the higher interest rates by the Federal Reserve — designed to keep inflation in check — were not hurting home purchases. The National Association of Realtors said home sales rose to an annualized rate of 6.89 million in March, up from 6.7 million in February.
“The housing-sales report was big because there were a number of signs that the economy might be weakening, and this disputes that,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “There’s still a lot of work to do to really move the market forward, but this is a good start.”
Analysts noted that volume was relatively low compared to the past few weeks of heavy trading, and said some investors might prefer to sit out of the market until next week, when the Fed’s next decision on interest rates is due.
Wall Street is hoping the Fed will give a bullish forecast for the economy, which would continue to allow for gradual rate increases that corporate America can easily digest.
“The real key is interest rates,” said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. “We need to get back to that Goldilocks economy, where we’re growing enough to keep things going but keeping inflation at bay and interest-rate hikes measured. We do that, we’ll see stocks improve.”
Premcor surged 18 percent, or $10.70, to $69.70 on news of its acquisition, while Valero gained 83 cents to $75.87. The combined company would unseat Exxon Mobil as the largest refiner in North America.
The deal also consolidates refining capacity, a key concern given the runaway global demand for oil. Crude futures briefly reached $56 per barrel in early trading, but fell sharply in afternoon trading. A barrel of light crude settled at $54.57, down 82 cents.
In other merger news, Qwest was unchanged at $3.55 after MCI said Qwest’s $9.75 billion takeover bid was superior to that of Verizon, which now is expected to improve its $7.8 billion offer for MCI. Verizon held steady at $34.06, while MCI was down 2 cents at $26.67.