U.S. stocks surge on merger flurry:
Dow up triple digits, S&P 500 at 6-yr. high; BoNY, Mellon to merge:
By Nick Godt, MarketWatch
Last Update: 2:15 PM ET Dec 4, 2006
NEW YORK (MarketWatch) -- U.S. stocks powered higher Monday, with the Dow Jones Industrials Average advancing triple digits, as positive momentum from a flurry of mergers, including a megadeal in the banking sector, offset bad news from blue-chip drug maker Pfizer Inc.
The Dow industrials ($INDU) were last up 104 points at 12,298, with 27 of 30 components contributing to gains.
Within the Dow, Pfizer (PFE) fell 11% on news that it halted development of a once-promising cholesterol drug due to safety concerns.
But the impact on the blue-chip average was offset by a spate of mergers, especially news that Bank of New York Co. (BK) agreed to buy Mellon Financial Corp. (MEL) to create a $43 billion giant ranked as the world's largest custodian of financial assets.
That helped provide a lift to the financial sector, with shares of Dow members American Express Co. (AXP) , Citigroup Inc. (C) and J.P. Morgan Chase & Co. (JPM) all advancing more than 1%.
The S&P 500 Index ($SPX) rose 13 points to a six-year high of 1,409, and the Nasdaq Composite Index (COMP) gained 39 points to 2,452.
The technology sector also received a boost from merger news after news that LSI Logic Corp. (LSI) said that it will buy Agere for $4 billion.
"You have a lot of different sectors seeing consolidation, but you also have some negative news from Pfizer," said Art Hogan, chief market strategist at Jefferies & Co. "On the whole, I would say that there is more good news than bad news. As we stare down the week, we may be able to get some up days."
Trading volume was 860 million shares on the New York Stock Exchange and 1.29 billion on the Nasdaq.
Advancers beat decliners 25 to 8 on the Big Board and 7 to 3 on the Nasdaq.
By sector, banks ($BKX) , semiconductors ($SOX) and airlines (XX:$XAL: news, chart, profile) were strong, while oil ($OIX) , precious-metals miners ($XAU) and pharmaceuticals ($DRG) were weak.
Also providing a lift was Chicago Federal Reserve President Michael Moskow, who helped soothe fears that the economy was headed for a hard landing.
Speaking to reporters after a speech early Monday, Moskow said weaker-than-expected data released last week did not cause him to change his view that the economy was still on solid ground.
On Friday, stocks fell on the day and for the week after the Institute of Supply Management's manufacturing index fell to 49.5% in November, which indicated that the manufacturing sector contracted for the first time in more than three years.
News that the pending home-sales index dropped in October had little immediate impact on the stock market.
Hugh Johnson, chairman of Johnson Illington Advisors, tells MarketWatch that stocks should continue to move even higher in what remains a "liquidity-driven market."
"It's a liquidity-driven market and that's very, very positive and probably implies that stock prices will move even higher," he said, even if he believes that the market is now about 6% overvalued.
Monday's flurry of mergers, Johnson commented, is an example of the strength of corporate profits and cash flow, adding that companies have a "strong need to do something with that cash."
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