21 May 2012 | Andrea Tse & Shanthi Bharatwaj
Stocks Snap Losing Streak in Style
Wall Street gets a lift from M&A activity and news that the Chinese government plans to undertake measures to spur more economic growth.
NEW YORK (TheStreet) – The major U.S. stock indices all gained more than 1% Monday, rebounding from their worst weekly performance of 2012, as international leaders took steps to calm fears about the future of the euro.
Wall Street saw its best session since the beginning of May on a welcome dose of M&A activity with Eaton Corp. ( ETN) agreeing to buy Cooper Industries ( CBE) for $11.8 billion in cash and stock. Shares of Cooper Industries soared 25%.
News that the Chinese government plans to undertake measures to boost the world’s second largest economy also helped market sentiment.
A glaring negative was the heavy selling pressure on Facebook ( FB – Get Report), which made a shaky public debut on Friday. Shares of the social networking giant dived on Monday though, breaking well below their offering price of $38 each and losing roughly 11% to close at $34.03.
The Dow Jones Industrial Average rose 135 points, 1.1%, to close on a high note at 12,504. The blue-chip index had lost ground in six straight sessions, and 12 of the past 13 trading days.
The S&P 500 jumped 21 points, or 1.6%, to close at 1316, moving off a fourth-month low. The Nasdaq surged 68 points, or nearly 2.5%, to close at 2847. Apple ( AAPL) surged nearly 6%.
Breadth within the Dow was positive with 23 of the index’s 30 components finishing higher. The biggest percentage gainers were Boeing ( BA), Caterpillar ( CAT), Hewlett Packard ( HPQ), Alcoa ( AA), and duPont ( DD).
JPMorgan Chase ( JPM – Get Report) and Bank of America ( BAC – Get Report) were the biggest drags on the Dow.
JPMorgan shares fell nearly 3% after CEO Jamie Dimon said the bank has suspended its $15 billion share buyback program in the wake of its recently disclosed $2 billion trading loss.
In the broader market, the number of winners outpaced losers by a more than 6-to-1 ratio on the New York Stock Exchange and more than 3-to-1 on the Nasdaq.
From a sector standpoint, capital goods, technology, basic materials and conglomerates were leading the gains, with the majority of the S&P 500’s large-cap sectors in positive territory.
“What happens in China has a disproportionate effect on what happens elsewhere“ said Telly Zachariades, partner at Valence. Without providing details of the measures he had in mind, Wen said “the relationship between maintaining growth, adjusting economic structures and managing inflation, must be properly handled,” according to the Xinhua News Agency. “We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth.”