Stocks Close Sharply Higher In Reaction To M&A News - U.S. Commentary

(RTTNews) - Extending the rally seen last month, stocks moved sharply higher over the course of the trading day on Monday. With the gains on the day, the Dow reached a three-month closing high, while the Nasdaq and the S&P 500 reached their best closing levels in over two months.

The major averages ended the day firmly in positive territory, just off their highs for the session. The Dow climbed 165.22 points or 0.9 percent to 17,826.6, the Nasdaq soared 73.40 points or 1.5 percent to 5,127.15 and the S&P 500 jumped 24.69 points or 1.2 percent to 2,104.05.

The buying interest on Wall Street partly reflected a positive reaction to news on the merger-and-acquisition front, which suggests companies are optimistic.

Shares of Dyax (DYAX) moved sharply higher after the drug developer agreed to be acquired by Shire (SHPG) for $5.9 billion in cash.

Digit market tools maker Constant Contact (CTCT) also posted a standout gain after the company agreed to be acquired by Endurance International Group (EIGI) for $1.1 billion in cash.

On the other hand, shares of Visa (V) moved to the downside after the credit card giant announced an agreement to buy Visa Europe in a deal valued at as much as $23.4 billion.

Traders were also reacting to the latest U.S. economic news, including a report from the Institute for Supply Management showing a slight expansion in manufacturing activity in the month of October.

The ISM said its purchasing managers index edged down to 50.1 in October from 50.2 in September, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to dip to 50.0.

Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "Comments from the panel reflect concern over the high price of the dollar and the continuing low price of oil, mixed with cautious optimism about steady to increasing demand in several industries."

A separate report from the Commerce Department showed that construction spending rose by more than expected in the month of September.

The report said construction spending climbed 0.6 percent to an annual rate of $1.094 trillion in September from the revised August estimate of $1.088 trillion. Economists had expected spending to rise by 0.4 percent.

Sector News

Biotechnology stocks showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 5.1 percent. With the gain, the index reached its best closing level in over a month.

Exact Sciences (EXAS), Novavax (NVX), and Isis Pharmaceuticals (ISIS) turned in some of the biotech sector's best performances.

Significant strength was also visible among computer hardware stocks, as reflected by the 3.8 percent gain being posted by the NYSE Arca Computer Hardware Index. HP Inc. (HPQ) posted a standout gain after completing its split from Hewlett Packard Enterprises (HPE).

Oil service stocks also saw considerable strength on the day, resulting in a 3.2 percent gain by the Philadelphia Oil Service Index up. The strength in the sector came despite a decrease by the price of crude oil.

Steel, brokerage, commercial real estate and telecom stocks also moved notably higher amid broad based strength on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index tumbled by 2.1 percent, while Hong Kong's Hang Seng Index slumped by 1.2 percent.

Meanwhile, the major European markets all ended the day in positive territory. While the U.K.'s FTSE 100 Index closed just above the unchanged line, the French CAC 40 Index rose 0.4 percent and the German DAX Index advanced by 0.9 percent.

In the bond market, treasuries moved back to the downside after the rebound seen last Friday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose 3.6 basis points to 2.187 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to the release of the Commerce Department's report on factory orders in the month of September.