Merger news, home sales data boost US stocks

Stocks made a strong move higher Monday as a new spate of merger activity and a surprising rise in home sales restored investors’ confidence in the economy and eased fears of inflation and higher interest rates.

The news of Valero Energy Corp.’s eight billion dollars takeover of oil refiner Premcor Inc. – creating the largest oil refiner in North America - reassured investors that corporate America was still willing to make large deals despite economic uncertainty.

A climb in home sales also lifted investors’ spirits, with the unexpected jump illustrating that the higher interest rates by the Federal Reserve – designed to keep inflation in check – were not hurting on home purchases. The National Association of Realtors said home sales rose to an annualised rate of 6.89 million in March, up from 6.7 million in February.

“The housing sales report was big because there were a number of signs that the economy might be weakening, and this disputes that,” said Ken Tower, chief market strategist for Schwab’s CyberTrader. “There’s still a lot of work to do to really move the market forward, but this is a good start.”

According to preliminary results, the Dow Jones industrial average rose 84.76, or 0.83%, to 10,242.47.

Broader stock indicators also moved sharply higher. The Standard & Poor’s 500 index was up 9.98, or 0.87%, at 1,162.10, and the Nasdaq composite index gained 18.59, or 0.96%, to 1,950.78.

The bond market was little changed after last week’s gains, with the yield on the 10-year Treasury note holding steady at 4.25% from late Friday. The dollar rose against most major currencies, while gold prices fell.