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Mining industry

Wall Street Sees Modest Advance Amid Mergers and Acquisitions

Strategic Insights

— 2 min read

A series of massive mergers and acquisitions propelled Wall Street to a modest advance on Monday, although many investors remained cautious ahead of the Federal Reserve's interest rate decision later in the week. The day's activity was buoyed by news from Phelps Dodge Corp. and Arcelor SA, with both companies announcing multi-billion dollar deals. Investors welcomed the news as a sign of economic health, but were also worried about the Fed's hawkish stance on inflation, which could impact interest rates.

Key Takeaways:

  • The Dow Jones industrial average rose 56.19 points, or 0.51 percent, to 11,045.28, as investors cheered the news of several major mergers and acquisitions.
  • Mergers and acquisitions are seen as a sign of economic health, with major companies not expected to make major deals if they anticipate a decline in the economy.
  • The Federal Reserve's interest rate decision later in the week will likely dominate trading, with investors fearful of further rate hikes to combat inflation.
  • Investors were also worried about the impact of inflation on the economy, with the yield on the 10-year Treasury note rising to 5.24 percent from 5.23 percent late Friday.
  • The dollar fell against most major currencies, while gold prices were little changed, and oil prices rose on concerns about a shipping glitch in the Gulf of Mexico.
  • Sales of new homes fell to an annualized rate of 1.234 million in May, down from 1.198 million the previous month but better than the 1.15 million economists expected.
  • Investors welcomed the chance to buy up stocks in the mining, steel, and healthcare sectors, which are seen as defensive plays for a questionable economy.
  • Inco surged 10 percent to $64.21 and Falconbridge gained 5.1 percent to $51.80, while Phelps Dodge tumbled 8.1 percent to $76.23 after announcing a takeover.
  • Arcelor SA fell 77 cents to $31.40 after wrapping up a sometimes-acrimonious acquisition agreement with Mittal Steel Co.
  • Johnson & Johnson fell $1.11 to $60.21, while Pfizer climbed 37 cents to $23.01 after agreeing to sell its consumer products unit to Johnson & Johnson.

Statistics:

  • Dow Jones industrial average rose 56.19, or 0.51 percent, to 11,045.28.
  • S&P 500 index rose 6.06, or 0.49 percent, to 1,250.56.
  • Nasdaq composite index rose 12.20, or 0.58 percent, to 2,133.67.
  • Yield on the 10-year Treasury note rose to 5.24 percent from 5.23 percent late Friday.
  • Sales of new homes fell to an annualized rate of 1.234 million in May.
  • Oil prices rose to $71.80, up 93 cents, on the New York Mercantile Exchange.

Sources:

  • New York Stock Exchange: http://www.nyse.com
  • Nasdaq Stock Market: http://www.nasdaq.com
  • The Pueblo Chieftain, Colo., "Wall Street sees modest advance amid mergers and acquisitions," June 27, 2006, Distributed by Knight Ridder/Tribune Business News.

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