Wall Street snaps 3-day losing streak

Written by Reuters
Tuesday, 29 September 2009 06:59

NEW YORK: US stocks rallied on Monday, Sept 28 snapping a three-day losing streak, as a spurt of corporate takeovers in the TECHNOLOGY [] and health-care sectors fueled optimism about share values, according to Reuters.

Mergers and acquisitions are typically viewed as bullish as it suggests companies are more optimistic about the business outlook.

A number of deals were announced and investors bet more could follow. Xerox Corp agreed to buy Affiliated Computer Services Inc, and Abbott Laboratories said it would pay US$6.6 billion for Solvay's drug unit.

"It's always a positive sign when you see companies putting money to work, whether they buy other companies, invest in new plants, (or) buy back their own stock," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut.

"With depressed stock prices, like we've had over the past year and a half, a lot of companies will find it cheaper to buy a company than to grow that same type of company organically. It's a more effective way to put money to work sometimes."

The Dow Jones industrial average rose 124.17 points, or 1.28 percent, to end at 9,789.36. The Standard & Poor's 500 Index gained 18.60 points, or 1.78 percent, to 1,062.98. The Nasdaq Composite Index shot up 39.82 points, or 1.90 percent, to 2,130.74.

With Monday's gains, the Dow Jones industrial average held an advance of about 16 percent in the quarter so far, which would make it the index's best such period since the fourth quarter of 1998.

But the end of the third quarter on Wednesday may spur volatility as fund managers engage in what is known as "window dressing" -- when they sell laggards in favor of outperformers to spruce up portfolios at quarter's end.

In the last three sessions, the S&P 500 had declined more than 2 percent after rallying nearly 60 percent from the 12-year closing low of early March.

Abbott climbed 2.6 percent to US$48.58, while Affiliated Computer advanced 14 percent to US$53.86.

Xerox, which valued the cash-and-stock deal for Affiliated at an initial US$6.4 billion, sank 14.5 percent to US$7.68.

Other deals on Monday included U.S. diversified health-care company Johnson & Johnson's purchase of an 18 percent stake in biotech firm Crucell for 302 million euros (US$444 million) as part of a flu vaccine development deal, the Dutch company said on Monday.

The pharmaceuticals index climbed 1.3 percent.

Crucell fell 6.6 percent to US$22.13 on Nasdaq, but J&J, a Dow component, was up 1.1 percent at US$61.27 on the New York Stock Exchange. - Reuters