New York – Investors resumed their buying spree on Wall Street Tuesday, driving stocks higher after a bid for media company Dow Jones & Co. revived enthusiasm about takeover activity.
The Dow Jones industrial average reached another record close, its 38th since October, as big-company stocks benefited from the turnaround.
Earlier in the session, stocks wavered on mixed economic data that showed strength in manufacturing but a wilting housing market and weak car sales. After April’s big advance, investors were wary that the current economy wouldn’t justify another move higher on Wall Street.
But the caution dissipated after Dow Jones, which publishes The Wall Street Journal, confirmed that it received an unsolicited bid from Rupert Murdoch’s News Corp. to buy the company for $5 billion, or $60 a share.
“The market kind of just took off from there,” said Todd Leone, managing director of equity trading at Cowen & Co.
News of the bid boosted media companies and publishers in particular, but also encouraged buying in other sectors, too, as it reaffirmed the ongoing trend of surging takeovers.
“It’s money pouring into the market,” Leone said.
The Dow industrials rose 73.23, or 0.56 percent, to 13,136.14, after dropping to 13,041.30 in earlier trading.
Broader stock indicators also pared early losses and turned higher. The Standard & Poor’s 500 index rose 3.93, or 0.27 percent, to 1,486.30, and the Nasdaq composite index rose 6.44, or 0.26 percent, to 2,531.53.
Bond prices dropped after the manufacturing data made lower rates look less likely, and the yield on the 10-year Treasury note rose to 4.64 percent, up from 4.62 percent late Monday.
Adding to the takeover buzz was a report that Microsoft Corp. is considering buying online advertising company 24/7 Real Media. 24/7 Real Media rose $2.02, or 20 percent, to $11.97, while Microsoft rose 46 cents to $30.40.
Though takeover fervor boosted stocks Tuesday, investors will be watching upcoming economic data, especially Friday’s jobs data, to decide whether to tread further into record terrain or restrain their buying. April saw the biggest percentage gain in the Dow since December 2003.
Robust manufacturing activity is good for many U.S. companies, but it reduces the chance that the Federal Reserve will cut interest rates to boost spending – especially amid rising costs, which the ISM’s report described.
