Wall Street ended solidly higher Monday following a burst of big corporate deals.
The S&P 500 rose 1.3%, erasing much of its loss from last week. Technology companies led the gains once again.
Nvidia jumped after announcing plans to buy fellow chipmaker Arm Holdings, and Oracle climbed after the business software maker beat out Microsoft to become the tech partner of TikTok, the popular video-sharing app based in China. Immunomedics nearly doubled after the cancer drug specialist agreed to be acquired by Gilead Sciences. European markets were mixed and Asian markets closed broadly higher. Treasury yields held steady.
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Nvidia jumped 4.9% after announcing plans to buy fellow chipmaker Arm Holdings in a deal worth up to $40 billion. Oracle climbed 5% after the business software maker beat out Microsoft to become the “trusted technology provider” of TikTok, the popular video-sharing app based in China. And the stock of Immunomedics nearly doubled after the cancer drug specialist agreed to be acquired by Gilead Sciences in a $21 billion deal. Gilead shares rose 3.4%.
AstraZeneca was up 0.8% following news over the weekend that clinical trials for the pharmaceutical company’s coronavirus vaccine will resume after being paused due to a reported side-effect in a patient in the U.K. The vaccine is seen as one of the strongest contenders among the dozens of coronavirus vaccines being tested.
The Dow Jones Industrial Average was up 326 points, or 1.2%, to 27,993 as of 1:47 p.m. Eastern time. The Nasdaq, which includes many tech stocks, rose 1.6%. Small company stocks were notching solid gains, sending the Russell 2000 index 2.3% higher. European markets were mixed and Asian markets closed broadly higher.
The S&P 500 is coming off a two-week slide amid increased volatility in the market as investors turn cautious following a five-month rally for stocks fueled largely by a run-up in big tech companies.
The pandemic accelerated the use of online services by businesses and individuals, driving shares of Apple, Amazon, Microsoft, Zoom Video and other tech companies sharply higher through the summer. But concerns that the high-flying tech stocks had soared too high have put investors in a selling mood in September. The S&P 500 is down 3.3% so far this month, while the Nasdaq has pulled back 6.4%.
“We know that momentum is going to slow a little bit, that’s expected,” said Esty Dwek, head of global market strategy at Natixis Investment Managers. “It wasn’t supposed to be, or it was never going to be a straight line without any bumps in the road.”
Despite its September stumble, stocks retain much of their gains since setting record highs less than two weeks ago. The S&P 500 is up 4.7% for the year. The Nasdaq is up 22.8%. Even so, analysts expect more volatility for stocks in the months ahead as the market navigates uncertainty over the outcome of the election, pessimism that Democrats and Republicans in Washington will be able to find a deal to send more aid to unemployed workers and an economy still struggling amid the pandemic.
One big factor that remains in the stock market’s favor is the Federal Reserve, which continues to pump aid into the economy. It has slashed short-term interest rates to record lows and bought up all kinds of bonds to support markets. It also said recently it will keep delivering stimulus even if inflation rises above its target level, as long as inflation had been well under it before then.
Investors will be focused this week on the central bank’s latest interest rate and economic policy update on Wednesday, following a two-day meeting of policymakers. After the July meeting, the Fed kept its key interest rate unchanged at a record low near zero. Fed policymakers also pledged to keep rates low until they are confident that the economy has weathered the pandemic-induced recession.
Low rates often act like steroids for Wall Street, encouraging investors to pay higher prices for stocks relative to corporate profits, which can benefit high-growth stocks in particular.
Traders also will have their eye on a batch of new data due out this week on U.S. home construction, retail sales and consumer sentiment. Housing has been a highlight of the economic recovery as ultra-low interest rates have helped drive home sales and spurred builders to ramp up construction. Homebuilder stocks have been climbing even during the market pullback much of this month.
The yield on the 10-year Treasury slipped to 0.66%. That’s down from 0.67% late Friday, but remains notably higher than the 0.53% it was offering at the end of July.
European markets were mixed, while Asian markets closed broadly higher.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama