Stocks surge 1%; Dow up over 250 points
U.S. stocks closed more than 1 percent higher on Monday amid encouraging talk of stimulus in Asia, as investors eyed the week’s economic data.
“This would be the first back-to-back positive close we’ve had this month,” said Art Hogan, chief market strategist at Wunderlich Securities ahead of the close. “That is remarkable in it of itself.”
Hogan made his remarks after the Dow Jones industrial average opened more than 150 points up following positive economic data. “We got a coil spring effect, and often times that doesn’t hold,” he said.
Personal income in February was mostly in-line with consensus, posting a gain of 0.4 percent, above expectations of 0.3 percent. Consumer spending rose 0.1 percent.
Pending homes sales were up 3.1 percent in February, driven primarily by sales in the West and Midwest.
The Dow Jones industrial average gained more than 260 points. The S&P 500 rose more than 1 percent, with energy leading sector advancers with an increase of more than 2 percent as oil prices fell.
“Eased tensions in the Middle East and benign economic data gave bargain hunters some motivation to step in,” James Meyer, chief investment officer at Tower Bridge Advisors, said in a note. “This morning there are a slew of merger deals. Merger activity is often a catalyst for a stronger stock market, as it paints a picture that suggests corporations see bargains out there in the market.”
Oil declined as discussions over Iran’s nuclear program indicated a possible end to sanctions and an increase in Iranian oil exports. Fighting continued in Yemen.
Several pharmaceutical firms announced deals before the open.
UnitedHealth (UNH) is buying pharmacy benefits manager Catamaran (Toronto Stock Exchange: CCT-CA) for $12.8 billion or $61.50 per share and combining it with its OptumRx unit.
Auspex Pharmaceuticals (ASPX) is being bought by Teva (Tel Aviv Stock Exchange: TEVA-IL)for $101 per share, or $3.2 billion in cash. Auspex, which went public last year, specializes in treatments for patients with movement disorders and other rare diseases.
“Certainly we’re still seeing a fair amount of Merger Monday. I think that’s giving the market something to jump on,” said Paul Nolte, portfolio manager at Kingsview Asset Management. “The fact that I’m buying your company is that I see value in your company. … (But) not all mergers are good a year or two later.”
Tuesday marks the end of the first quarter, and few earnings are expected in the abbreviated trading week. The primary data point for the week is the key March employment report, which comes out on Friday when markets are closed for Good Friday.
“Sounds like what sparked some of the rally was easing and things in China,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab. “This looks like it could be a fairly quiet week. (Whenever) you get a 3-day weekend the market gets a little quiet.”
European stocks climbed amid encouraging euro zone economic reports. China’s benchmark Shanghai Composite index hit a fresh seven-year high as markets interpreted weekend comments from Zhou Xiaochuan, governor of the People Bank’s of China, as indication of further stimulus. Zhou warned on Sunday that the world’s second-largest economy needs to be vigilant for signs of deflation.
“In terms of technicals this is just noise,” said Peter Boockvar, chief market analyst at The Lindsey Group. “This is just trading within a range (of 2,040 and 2,110 in the S&P 500). … We need to see earnings season before we know which way to go.”
U.S. stocks traded lower for most of last week, only turning higher late on Friday with Federal Reserve Chair Janet Yellen reiterating that a rate hike would come gradually.
Fed Vice Chair “Stanley Fischer and Janet Yellen have made it pretty clear we won’t be at odds with other central banks,” Hogan said.
The U.S. dollar (New York Board of Trade (Futures): =USD) gained about 0.8 percent against major currencies on Monday, with the euro(Unknown:EURBA=) near $1.08. Crude oil (New York Mercantile Exchange: @CL.1) settled down 19 cents at $48.68 a barrel on the New York Mercantile Exchange. The continuing trends in the dollar and oil are expected to weigh negatively on earnings reports in April.
“Once we get through the first quarter here we’re hoping the worse of the revisions are over,” said Nick Raich, CEO of The Earnings Scout, noting that most stocks have tended to rise despite lowered estimates and forecast revisions.
For these four days, it’s “less of an earnings week and more of an economic data week,” Raich said.
“The big one is unemployment, [but] we’re going to be closed for that, so the fireworks will come in on Monday, said Peter Cardillo, chief market economist at Rockwell Global Capital.
The Dow Jones Industrial Average (Dow Jones Global Indexes: .DJI) closed up 263.65 points, or 1.49 percent, at 17,976.30, with Boeing (BA) leading gains and Intel (INTC) and Microsoft (MSFT)the only blue chips lagging.
The S&P 500 (^GSPC) closed up 25.22 points, or 1.22 percent, at 2,086.24, as energy led gains across all ten sectors.
The first trading day of the second quarter, which begins on April 1, has shown strong performance over the past 20 years, according to the Stock Trader’s Almanac. During that time, the S&P 500 advanced 16 times with an average gain of 0.56 percent. The index only declined four times, most recently in 2013 when April 1 was the day after Easter, which has marked the S&P 500’s worst post-holiday trading session.
The Nasdaq (^IXIC) closed up 56.22 points, or 1.15 percent, at 4,947.44.
The U.S. 10-year Treasury yield (U.S.:US10Y) traded at 1.9546 percent.
The CBOE Volatility Index (VIX) (^VIX), widely considered the best gauge of fear in the market, traded near 14.
About three shares advanced for every decliner on the New York Stock Exchange, with an exchange volume of 670.40 million and a composite volume of nearly 2.8 billion at the close.
Gold futures closed $14.30 down at $1,185.50 an ounce.
The iShares Nasdaq Biotechnology ETF (IBB) (IBB) closed about 1 percent higher.
In other corporate news, Madison Square Garden (MSG) plans to split into two companies, one to own its sports teams, entertainment productions, and the MSG arena, while the other would distribute the company’s sports and entertainment content. MSG had revealed that it was exploring such a move back in October.
Yahoo (YHOO) and Microsoft (MSFT) will extend talks aimed at renegotiating their 10-year search partnership by 30 days. The two had originally struck the partnership in 2010 in hopes of better competing with Google.
Best Buy (BBY) will consolidate and close stores in Canada, in a move that the electronics retailer said will cost it up to $280 million in restructuring charges this year.
DreamWorks Animation (DWA)‘s movie “Home” topped the weekend box office with better-than-expected North American ticket sales of $54 million. “Home” will be the only release by the firm in 2015.
–CNBC’s Peter Schacknow contributed to this repor