A trader works on the floor of the New York Stock Exchange in New York, December 11. U.S. stocks gained yesterday as a spate of takeover deals reassured investors that companies were attractive purchases at current prices. - Reuters
NEW YORK, United States (AP):
Wall Street extended its advance yesterday as investors weighed several takeover developments and placed bets ahead of the Federal Reserve's decision on interest rates.
A series of recent acquisition announcements has reassured investors that corporations still feel the economy is robust enough to strike deals. There was about US$45.4 billion worth of acquisitions announced by Standard & Poor's 500 companies last week, setting up this year to be the best for M&A since 2000.
Driving the Dow Jones industrials was American International Group Inc., which agreed to buy the U.S. port operations from state-owned Dubai Ports World. Hedge fund SAC Capital Advisors LLC bought a stake in miner Phelps Dodge Corp., and said it would oppose the company's planned takeover by Freeport-McMoRan Copper & Gold Inc.
Speculation about pending deals also helped the market. Medical device maker Biomet Inc., and travel reservation company Sabre Holdings Corp. rose on reports they might be acquisition targets.
However, light volume yesterday indicated investors were a bit more cautious as they adjusted their positions before the Fed's meeting today. The central bank raised rates 17 straight times starting in June 2004, then left them unchanged at its last three meetings.
In early afternoon trading, the Dow Jones industrial average rose 16.26, or 0.13 per cent, to 12,323.75.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.52 per cent from 4.55 per cent late Friday. The dollar was mixed against other major currencies, while gold prices moved higher.
The price of light sweet crude fell 7 cents to US$61.96 on the New York Mercantile Exchange.
Stocks bounced around in morning trading as investors began to place bets of what will come out of the Fed meeting. Policymakers have been trying to engineer an economic soft landing, carefully moderating growth without pushing the economy into a recession.
However, the volatility might not entirely be because of investors guessing which direction the Fed might take.
"It will be all about the Fed's language, and that might be causing some intraday volatility as people set up their play ahead of the decision," said Brian Williamson, an equity trader at The Boston Company Asset Management. "But, that's not all of it. What's happening is that as the market creeps toward a year high you see some investors exiting their positions."
Phelps Dodge shares fell 42 cents to US$123.25 after SAC Capital Partners, which is led by financier Steven A. Cohen, made a bid for the Phoenix-based miner. Last month, Freeport-McMoRan said it planned to buy Phelps Dodge.
AIG rose 84 cents to US$71.19 after the United Arab Emirates sold off its U.S. ports to the insurance company. Terms of the deal were not disclosed.