Corporate deals propel Wall Street

January 20, 2010
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, NEW YORK, Jan 20 – Wall Street rallied Tuesday as the market was energized by news of big corporate deals and traders braced for the outcome of a key US Senate election.

The Dow Jones Industrial Average rose 115.78 points (1.09 percent) to close at 10,725.43 as the key US indexes leapt to their best levels in more than 15 months.

The Nasdaq composite climbed 32.41 points (1.42 percent) to 2,320.40 and the Standard & Poor\’s 500 index added 14.20 points (1.25 percent) to 1,150.23.

With trade resuming after a three-day weekend, the market reacted to news that British chocolate bar maker Cadbury agreed to a sweetened takeover bid from US giant Kraft Foods worth some 19 billion dollars to help the food giant expand its reach in the confectionery sector.

That deal, along with Tyco International\’s agreement to acquire Brink’s Home Security, "are boosting some optimism that confidence is returning to the corporate sector," said analysts at Charles Schwab & Co. in a client note.

Al Goldman at Wells Fargo Advisors said the market was on edge ahead of the results of a Senate race in Massachusetts Tuesday "as it has important political implications no matter who wins."

He said a win by the Republican challenger "would probably be well-received by the market as investors favor congressional gridlock," and the outcome may affect the supermajority needed by Senate Democrats to pass key measures.

John Wilson at Morgan Keegan added that Wall Street sees a Republican victory as a way to slow or modify a massive health care reform measure being considered in Congress, which has raised fears among some in the business community.

"Healthcare stocks seem to be rallying on hopes that the Massachusetts election will change the equation in their favor," he said.

Andy Fitzpatrick at Hinsdale Associates said the market is still unsure if the current earnings season — a key indicator of the health of the corporate sector and the overall economy — will live up to high expectations.

"All eyes will again be on earnings reports as companies like IBM, Google, Bank of America, Starbucks and Goldman Sachs announce their fourth-quarter results," he said.

"Expect another week of stops and starts as the market tries to figure out if this recovery is in fact advancing or rather retreating. Wall Street will also be listening closely to company outlooks as a gauge of what to expect in 2010 and could place more weight on that than recent earnings."

IBM rose 1.79 percent to 134.14 dollars before releasing its results after the market close, which showed a rise in quarterly profit to 4.8 billion dollars, capping a year of a record 13.4 billion dollars.

Apple shares surged 4.42 percent to a record 215.03 dollars after the company said it would host an event later this month expected to be the unveiling of a long-awaited tablet computer.

Cadbury\’s US-listed shares rallied 6.14 percent to 55.09 dollars after agreeing to a takeover worth 11.5 billion pounds (18.9 billion dollars) after a long battle with Kraft, down 0.57 percent at 29.41 dollars.

Financial giant Citigroup jumped 3.51 percent to 3.54 dollars after posting a net loss of 7.6 billion dollars in the fourth quarter of 2009, resulting in a full-year loss of 1.6 billion dollars, which executives said indicated progress is reviving the banking firm.

Among stocks in focus in the insurance and health sectors, Aetna rallied 4.15 percent to 32.66 dollars, Cigna added 2.93 percent to 37.92 dollars, Merck climbed 2.91 percent to 40.62 dollars and Pfizer advanced 2.62 percent to 20.00 dollars.

Bonds fell. The yield on the 10-year US Treasury bond increased to 3.707 percent from 3.676 percent Friday and that on the 30-year bond rose to 4.598 percent against 4.575 percent. Bond yields and prices move in opposite directions.

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