M&A, Earnings Spark Solid Rally on Wall Street
FOX Business: The Power to Prosper
Encouraged by a slew of M&A activity and earnings beats from Adobe and others, the bulls lifted Wall Street solidly higher on Tuesday and pushed all three major indexes to their highest levels in at least two years.
Today’s Markets
The Dow Jones Industrial Average rose 55.03 points, or 0.48%, to 11533.16, the Standard & Poor's 500 gained 7.52 points, or 0.60%, to 1254.60 and the Nasdaq Composite jumped 18.05 points, or 0.68%, to 2667.61. The FOX 50 picked up 4.72 points, or 0.53%, to 896.39.
The latest burst of buying landed the S&P 500 in the green for the 10th time in the last 11 sessions and was led by regional lenders like PNC Financial (NYSE:PNC).
“Historically the market tends to trade well through the turn of the year. The market should have an upward drift to it into early January,” said Nick Kalivas, vice president of financial research at MF Global.
Most of the Dow's 30 stocks advanced, led by financial giants JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC) and American Express (NYSE:AXP). The index's weakest links were 3M (NYSE:MMM) and Merck (NYSE:MRK).
Lifted by the earnings reports, the Nasdaq Composite outperformed the broader markets. The index was driven higher by tech stocks like Dell (NASDAQ:DELL) and SanDisk (NASDAQ:SNDK).
“There’s absolutely no volume but we haven’t had volume with this rally for the last two years,” Ted Weisberg, a veteran NYSE trader at Seaport Securities, told FOX Business. “The lines of least resistance appear to be up and the tape is telling us [stocks] probably want to go higher.”
The bulls cheered several upbeat earnings reports on Tuesday, highlighted by Adobe Systems (NASDAQ:ADBE), which swung to a stronger-than-expected fiscal fourth-quarter profit and issued a strong outlook for the current quarter. Adobe's stock jumped 5.5% in the wake of the earnings beat.
Several other companies reported positive results, including Jabil Circuit (NYSE:JBL) and Carnival (NYSE:CCL), each of which closed sharply higher and at new 52-week highs.
At the same time, Wall Street benefited from a trio of merger announcements.
The biggest deal was made by TD Bank (NYSE:TD), which acquired Chrysler Financial for $6.3 billion, marking the second acquisition by a Canadian bank of a U.S. financial institution in the past week alone.
Inspired by the banking deals, the financial sector led the way higher, closing more than 1.6% higher. Regional banks like Regions Financial (NYSE:RF) and PNC Financial posted even steeper gains amid speculation there could be more takeovers on the horizon.
Dutch company Royal DSM scooped up U.S. nutrition company Martek Biosciences (NASDAQ:MATK) for $1.09 billion in cash, a 35% premium on Martek's closing price on Monday. Also, Lasercard (NASDAQ:LCRD) was bought out by Assa Abloy for $80 million.
Wall Street managed to shrug off more trouble on the currency front as the euro declined 0.22% to $1.3095 in the wake of Moody’s warning it may downgrade Portugal’s credit rating in the near-term because of concerns about its long-term economic prospects and rising interest rates. Fitch also threatened to downgrade Greece's credit rating again.
The ratings company reports offset enthusiasm earlier in the day about positive comments made by Chinese officials about the turbulent currency. Wall Street pays close attention to the dollar, which has an inverse relationship with equities.
In the commodities complex, crude oil rose 45 cents a barrel, or 0.50%, to $89.82. Economically-sensitive copper closed in on a new record, soaring 1.67% a pound to $4.2705. Gold gained $2.70 a troy ounce, or 0.19%, to $1,388.20.
Corporate Movers
Jabil Circuit (NYSE:JBL) leaped 10.5% to 52-week highs after the electronics manufacturing services provider topped estimates with a non-GAAP profit of 61 cents a share. Revenue climbed 32% to $4.1 billion, compared with estimates for $3.96 billion. Jabil also issued bullish guidance for the current quarter.
ConAgra Foods (NYSE:CAG) revealed a 16% decline in fiscal second-quarter profits, but its non-GAAP EPS of 45 cents met expectations. The maker of Chef Boyardee and Slim Jim said its revenue increased 2% to $3.16 billion, narrowly exceeding consensus calls for $3.14 billion.
CarMax (NYSE:KMX) slumped 7% even after beating the Street with EPS of 36 cents a share and revenue growth of 23% to $2.12 billion. Analysts had been calling for EPS of 34 cents on sales of $1.97 billion. Shares of the largest U.S. used car retailer had run up in recent months, including a 50% surge over the past 13 weeks alone.
Hewlett-Packard (NYSE:HPQ) former CEO Mark Hurd’s exit from the tech giant earlier this year is reportedly being investigated by the Securities and Exchange Commission. According to The Wall Street Journal, the SEC is looking into claims that Hurd, now an Oracle (NASDAQ:ORCL) exec, passed inside info about a planned acquisition to a former contractor before the deal was announced. The SEC is also looking into inaccurate expense reports filed by Hurd.
Darden (NYSE:DRI) slid nearly 6% a day after posting a 24% rise in fiscal second-quarter profits, but EPS of 54 cents that only matched consensus calls. The restaurant chain was hurt by a 1.6% decline in same-store sales at its Red Lobster locations. Darden also narrowed the full-year target for same-store sales at its Big Three brands.
Deutsche Bank (NYSE:DB) agreed to pay $553.6 million to the U.S. and admitted wrongdoing to settle a long-running tax shelter probe. The U.S. said the German bank’s actions generated billions in false tax losses.
Global Markets
The U.K.'s FTSE 100 rose 1.02% to 5951.80, France's CAC 40 jumped 1.09% to 3927.49 and Germany's DAX gained 0.85% to 7077.99.
In Asia, Tokyo's Nikkei 225 rallied 1.5% to 10370.50, Hong Kong's Hang Seng advanced 1.57% to 22993.90 and China's Shanghai Composite soared 1.79% to 2904.11.