Optimism sends Dow up 145

Optimistic investors bid US stocks sharply higher in light trading today, buoyed by the strength of the economy and even ignoring a slight rise in oil prices. The Dow Jones industrial average soared more than 140 points.

Much of Wall Street’s good will was carried over from Friday, when a strong employment report boosted investor confidence. But some analysts, noting that the light trading from last week also continued into Monday, wondered how sustainable the rally was.

“The market seems to be going up because there aren’t any sellers around, not because there’s a lot of demand. That has a chance to end badly,” said Richard Dickson, senior market strategist, at Lowry’s Research Reports. “Overseas markets are up strongly and oil’s down, and I think what we’re seeing is a little bit of a Pavlovian response to that more than anything else.”

Investors were also cheered by a 4.85 billion proposed merger in the casino industry. With mergers and acquisitions gaining popularity, investors saw the trend as a sign of a stable, healthy economy.

The Dow gained 148.26, or 1.4%, to close at 10,391.08.

Broader stock indicators were sharply higher. The Standard & Poor’s 500 index was up 18.03, or 1.6%, at 1,140.53, and the Nasdaq composite index rose 42.00, or 2.1%, to 2,020.62.

The gains marked an important transition from May’s heavy selloff. The Dow and Nasdaq had their best close since April 27, and the S&P 500 last closed above 1,040 on April 23.

The start of trading on the New York Stock Exchange, the Nasdaq Stock Market and the American Stock Exchange was delayed two minutes in a tribute to former President Ronald Reagan, who died on Saturday. Most US financials markets will be closed on Friday for the national day of mourning.

After remaining low for most of the day, benchmark light sweet crude oil climbed 22 cents to 38.71 in late trading on the New York Mercantile Exchange. The slight rise was largely ignored by investors who have worried about inflation in recent weeks as oil prices climbed past 42 a barrel. If oil prices can at least remain under 40 per barrel, analysts believe the market’s current upward trend may stabilise.

MGM Mirage has made an unsolicited 4.85 billion offer to acquire Mandalay Resort Group. MGM would also assume 2.8 billion in debt in what would be the biggest casino industry acquisition in history. Mandalay surged 9.96 to 70.23, while MGM Mirage fell 1.19 to 44.84.

McDonald’s was down 25 cents at 26.61 after it announced a 7.9% rise in same-store sales in May due to growing market share among fast-food chains.

Wal-Mart Stores said its same-store sales were tracking at the low end of its 4% to 6% forecasts. Wal-Mart gained 91 cents to 57.50.

General Motors rose 89 cents to 47.11 after it said it would spend up to 3 billion in China over the next three years, doubling its manufacturing capacity in the world’s fastest-growing car market.

Advancing issues outnumbered decliners by more than 4 to 1 on the New York Stock Exchange, where volume totalled 1.20 billion shares, compared with 1.12 billion at the same point on Friday.

The Russell 2000 index of smaller companies was up 11.15, or 2%, at 578.90.