New York – Wall Street soared Monday 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 of the market’s 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. In mid-June, Bear Stearns & Cos. had to bail out a hedge fund with investments tied to subprime mortgages.
Investors were also enthusiastic about new takeover activity, involving such targets as Canadian telecommunications company BCE Inc., rural wireless provider Dobson Communications and British telecommunications company Virgin Media.
“There’s favorable economic news and continuing merger talk. That’s a pretty good recipe for the market,” said Stuart Schweitz er, managing director and global markets strategist for JPMorgan Private Bank. He added, though, that the market has been seesawing in recent weeks and trading volumes are light, so the market’s gain should not be interpreted as a turnaround yet.
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.
Investors appeared unfazed Monday by high oil prices. Crude-oil futures on the New York Mercantile Exchange initially fell 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.
Gaining 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.
Trading volumes are low ahead of the Independence Day holiday on Wednesday, when U.S. stock exchanges will be closed. The markets will close early today.
