Deal activity by companies from chocolate makers to a nuclear submarine manufacturer buoyed Wall Street confidence on Monday, lifting US stocks after last week’s strong gains. The Dow Jones Industrial Average closed up 2 per cent at 10,226.94, its highest level since October last year.
The S&P 500 gained 2.2 per cent to 1,093.08 and the Nasdaq Composite climbed 2 per cent at 2,154.06.
In spite of volatile trading, Wall Street closed higher every day last week, shrugging off Friday’s data that showed a spike in unemployment.
A rally in the technology sector after Cisco’s results gave the Nasdaq its biggest daily gain since July.
“The market was probably too short going into those payroll numbers and the fact that there wasn’t a downside on Friday has injected some confidence,” said Nick Kalivas, vice-president of financial research at MF Global.
After an indicative offer two months ago, Kraft launched a formal hostile bid for Cadbury on Monday, valuing the UK company at £9.8bn ($16.4bn).
The terms were the same as the original offer but, due to the fall in Kraft’s share price, the implied value of the latest bid was slightly lower. Cadbury rejected the offer as “derisory”.
While the deal activity boosted market sentiment, Kraft was the only Dow company to end the day in negative territory, losing 0.9 per cent to $26.53. Cadbury shares edged up in London.
In other deals, Northrop Grumman, one of the largest US defence contractors, agreed to sell TASC, its advisory services unit, for $1.65bn to private equity groups General Atlantic and Kohlberg Kravis Roberts.
The sale is the latest sign of a revival in leveraged buy-outs. Northrop rose 3 per cent to $53.93.
Reports also revealed that Comcast was planning to finalise a deal to buy a controlling stake in NBC Universal from General Electric by next Monday. The acquisition would create one of the US’s largest media companies and values NBC Universal at about $30bn.
Comcast rose 3.8 per cent to $15.15 and General Electricgained 3.4 per cent to $15.85.
A pledge by the G20 over the weekend to keep stimulus programmes in place until the recovery was more certain added to the market’s optimism and boosted financial stocks. Bank of Americawas up 4.8 per cent to $15.77 and Citigroup gained 3.2 per cent to $4.19.
Elsewhere in the banking sector, East West Bancorpsurged 55 per cent to $13.41 after the California-based bank purchased its main rival United Commercial Bank (UCB), which was seized by regulators last week.
UCB, based in San Francisco, was the 120th bank to fail this year and was estimated to have assets worth $11.2bn. Morgan Stanley analysts welcomed the deal, upgrading East West from “equal-weight” to “overweight”.
The G20 assurances pushed gold to fresh highs and boosted other metal prices. ArcelorMittal, the world’s largest steelmaker, was raised from “neutral” to “buy” by MF Global, pushing the shares 4.9 per cent higher to $36.82.
United States Steel gained 3.6 per cent to $38.11 and the S&P Materials sector was up 3.2 per cent.
Global sales figures from McDonald’s sent shares in the fast food chain up 1.5 per cent to $62.64.
Total like-for-like sales rose 3.3 per cent in October, helped by strong demand from Europe. The gains help to offset a 0.1 per cent decline in US sales – the first monthly decline in the fast food retailer’s home market since March 2008.
Shares in RadioShack, the electronics retailer, were set to hit their highest level for two years after jumping 14.3 per cent to $20.27. The chain announced plans to sell versions of Apple’s iPhone later this month.
Dish Network rose 5.2 per cent to $20.14 after the company, America’s second-largest satellite TV provider, beat Wall Street forecasts.
Trex, the deckings and railings maker, was one of the market’s few casualties.
Its shares fell 2.5 per cent to $16.86 after the group posted a quarterly loss due to an impairment charge and continued weakness in the home construction sector.
