Wall Street rises as earnings, M&A stoke optimism

Wall Street rises as earnings, M&A stoke optimism

New York: US stocks rose on Tuesday as solid earnings and a flurry of merger activity underpinned a steady upward trend that reinforced investor optimism for the coming year.

The S&P 500’s close is on the cusp of closing levels not seen since before Lehman Brothers collapsed in September 2008, an important psychological barrier for investors at 1,255.08 points.

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Financials led the way higher, continuing their December rally after underperforming the broader market for much of the year. The KBW bank index jumped 1.9%.

Fund managers have been reallocating cash to equities from fixed income and reduced cash positions.

“We’ve been putting risk at work for some period of time and we think people will continue to regret holding too much cash and being too conservatively positioned," said Bob Browne, chief investment officer at Northern Trust in Chicago.

Northern Trust, which has $657 billion in assets under management, recently reduced its cash allocation and increased investments in US large cap equities and fixed income.

“If you take a balanced view of the positives and the negatives short term and long run, we think it gets you to an overweight position in equities," said Browne.

Adobe Systems Inc jumped 6% to $30.93 after it gave an upbeat forecast, while coal miner Massey Energy Co rose on expectations the company was lining up potential buyers. Massey gained 1.2% to $52.45.

The Dow Jones industrial average added 55.03 points, or 0.48%, to 11,533.16. The Standard & Poor’s 500 Index gained 7.52 points, or 0.60%, to 1,254.60. The Nasdaq Composite Index rose 18.05 points, or 0.68%, to 2,667.61.

While the S&P on Tuesday closed a hair below the 1,255.08 level breached on 19 September, 2008, it surpassed the 12 September, 2008 close of 1,251.70, which was the session before Lehman’s bankruptcy.

The S&P 500 notched another two-year high. The index has rallied 6.3% for the month and is up 12.5% for the year.

The S&P 500, which has gained in each of the last three-week, broke through the 61.8% Fibonacci retracement of the 2007-2009 bear market slide earlier this month.

Technicians said the next stop is the 76.4% retracement at 1,362. The exponential Relative Strength Index (RSI), though, suggests the S&P may be overbought in the short term. The RSI provides a measure of higher closes to lower closes over a given trading period and is closely watched by traders.

Elsewhere on the earnings front, electronics manufacturer Jabil Circuit Inc surged 10.7% to $19.55 after it reported better-than-expected quarterly profit and forecast a robust second quarter.

American International Group Inc gained 3.3% to $55.18 after officials briefed on the situation told Reuters the US government plans to sell a large piece of its stake in the company in two stock offerings next year.

In other individual movers, Martek Biosciences Corp spiked up 35.6% at $31.67 after Dutch group DSM, the world’s largest vitamins maker, agreed to buy the maker of US baby food ingredients.

About 6.26 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year’s estimated daily average of 9.65 billion. Volume is expected to be light throughout the holiday shortened week.

Advancing stocks outnumbered declining ones on the NYSE by 2,078 to 945, while on the Nasdaq, advancers beat decliners 1,928 to 730.

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