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Stocks rebound after market's bad week

September 29, 2009|Associated Press

NEW YORK — Major equity indexes rose more than 1% on Monday, breaking a three-day slide, as a burst of corporate deal-making helped boost investors' confidence about the economy and the stock market.

The Dow Jones industrial average rose 124 points, marking its biggest gain in more than a month and recouping much of what the 30-stock index lost last week.

News of large acquisitions by Abbott Laboratories and Xerox pushed shares of drug makers and technology companies higher, and the buying spread to other parts of the market as investors hoped that the $6-billion-plus deals could be a sign that takeover activity was finally picking up.

Mergers and buyouts slowed to a trickle at the peak of the financial crisis a year ago as companies turned away from risk and financing grew scarce.

But recently some big companies have shown a willingness to wager stock and borrow money to bulk up their businesses, easing some concerns about the staying power of the stock market's 6-month-old rally. Last week Dell said it would acquire tech service firm Perot Systems for $3.9 billion, and this month Kraft Foods made an overture for candy maker Cadbury for $16.7 billion.

"It's encouraging to all investors when you see companies buy, because basically what that says is they're in a more aggressive mode as opposed to being in the fetal position," said Mark Coffelt, portfolio manager at Empiric Funds in Austin, Texas.

On Monday, the Dow rose 124.17 points, or 1.3%, to 9,789.36, its biggest advance since Aug. 21. Last week, the blue-chip gauge lost 155 points on lackluster housing and manufacturing reports.

The broader Standard & Poor's 500 index rose 18.60 points, or 1.8%, to 1,062.98, and the Nasdaq composite index rose 39.82 points, or 1.9%, to 2,130.74.

The Russell 2,000 index of smaller-company stocks rose 2.4%.

Four stocks rose for every one that fell on the New York Stock Exchange. But volume was light because some market participants were off work for the Jewish holiday Yom Kippur.

The Dow and the S&P are up 16% this quarter, which ends today, and are on track to record their best quarter in more than a decade.

In corporate deal activity, Abbott Labs said Monday that it would acquire the pharmaceutical business of Belgian chemical maker Solvay for $6.6 billion, while Xerox agreed to buy Affiliated Computer Services for about $6.4 billion.

Shares of Affiliated Computer jumped 14%, Xerox sank 14% and Abbott Labs rose 2.6%.

Tech shares got another boost from Cisco Systems, which jumped 4.4% after a Barclays Capital analyst, citing increased demand, upgraded the maker of networking gear.

The government bond market was mixed. The yield on the benchmark 10-year Treasury note fell to 3.29% from 3.33% late Friday.

Overseas, key stock indexes rose 1.6% in Britain, 2.8% in Germany and 2.3% in France. Japanese shares fell 2.5%.

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