Wall Street rises as bond yields fall
EmptyNEW YORK -- Wall Street advanced sharply Monday in the first day of trading for the third quarter, boosted by a decline in Treasury yields, a rise in June manufacturing activity and a spate of buyout news.
The Dow Jones industrial average rose more than 100 points after the Institute for Supply Management's June manufacturing index came in at 56.0, slightly higher than the market expected and indicating stronger expansion than May's reading of 55.0. The report also showed a decrease in its prices paid index, suggesting that inflation pressures lifted a bit last month and easing some of the market's worries about the Federal Reserve's interest rate policy.
As inflation concerns lessened, the 10-year Treasury note's yield fell to 5.00% from 5.03% late Friday, dampened additionally by investors flocking to the safe-haven assets amid ongoing jitters about subprime lending. In mid-June, Bear Stearns & Cos. had to bail out a hedge fund with investments tied to subprime mortgages.
"There's a little positive to the subprime woes, that being that interest rates are dropping now," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn. "Ten-year rates are now back to about 5%."
The 10-year Treasury note's yield breached the 5% level in early June for the first time since last year, hit a peak of nearly 5.30%, and have since retreated. High rates can slow down deal making.
Investors were also enthusiastic about new takeover activity. Over the weekend, BCE Inc., a Canadian telecommunications company, received a multibillion-dollar buyout offer; AT&T Inc. on Friday agreed to buy Dobson Communications Corp., a rural wireless provider, for $2.8 billion; and on Monday, British telecommunications company Virgin Media Inc. said it received a buyout offer, following reports that private-equity firm the Carlyle Group had bid more than $11 billion.
In late morning trading, the Dow rose 102.43, or 0.76%, to 13,511.05.
Broader stock indicators also advanced sharplly. The Standard & Poor's 500 index rose 12.64, or 0.84%, at 1,515.99, and the Nasdaq composite index rose 24.32, or 0.93%, at 2,627.55.
Wall Street was pleased to see oil prices fall back from levels not seen since last August. Crude oil futures on the New York Mercantile Exchange dropped 94 cents to $69.74 a barrel Monday, after closing above $70 a barrel last week.
The dollar was mixed against other major currencies, while gold prices rose.
BCE rose $1.41, or 3.7%, to $39.20 after news of its buyout offer.
After AT&T said it would acquire Dobson, Dobson rose $1.33, or 12%, to $12.44, and AT&T rose 24 cents to $41.71. Virgin Media soared $4.36, or 18%, to $28.73, on news that Carlyle Group made a bid.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 409.2 million shares.
Trading volumes are fairly low ahead of the Independence Day holiday on Wednesday, when U.S. stock exchanges will be closed. The markets are also closing early on Tuesday.
The Russell 2000 index of smaller companies rose 8.20, or 0.98%, to 841.90.
Overseas, Japan's Nikkei stock average rose 1.15%. In afternoon trading, Britain's FTSE 100 was down 0.11%, Germany's DAX index was down 0.41%, and France's CAC-40 was down 0.43%.