New York – Stocks rebounded Monday after a fresh round of buyout news offered evidence that Wall Street’s penchant for deal-making hasn’t disappeared.
Better-than-expected profit news from Merck & Co. boosted the mood on Wall Street, helping it partially recover from a steep sell-off Friday that was triggered by some weak earnings reports and worries about souring subprime loans.
The stock market pushed those concerns aside Monday after Transocean Inc., the world’s largest offshore drilling contractor, and rival GlobalSantaFe Corp. said they agreed to merge. The combined company will have a market value of about $53 billion.
In addition, equipment rental company United Rentals Inc. agreed to be taken private by affiliates of Cerberus Capital Management LP for about $4 billion in cash, while British bank Barclays PLC said it would raise its offer for ABN Amro Holding NV to $93.2 billion to fight a rival bid.
The turnaround from Friday’s retrenchment demonstrates the market’s resiliency but also raises questions of whether the short-lived nature of most of this year’s pullbacks mean stocks are rising on a rickety foundation, said Ted Aronson, a partner at Aronson Johnson Ortiz in Philadelphia. Like many investors, he sees retreats as a healthful break for ascendent markets.
“We had a correction for a day. It’s amazing. I think the market has gone too far, too fast. With that said, there is no doubt that the market is just amazingly strong,” he said.
The Dow Jones industrial average rose 92.34, 0.67 percent, to 13,943.42, due in large part to Merck shares rising 6.75 percent. During the day, the Dow was up more than 100 points.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 7.47, 0.49 percent, to 1,541.57. The technology-heavy Nasdaq showed more-modest gains, rising 2.98, 0.11 percent, to 2,690.58.
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.96 percent from 4.95 percent late Friday.
The resumption of the market’s climb comes on a day absent any major economic news and appeared to at least temporarily quiet some concerns that a souring of subprime loans, those made to borrowers with poor credit, will upend the market’s advance. Uneasiness over bad loans and a resulting tightening of credit standards could stanch the huge flow of capital that has enabled market-advancing buyout activity.
