US stocks rose sharply on Monday as earnings and deal news, plus better-than-expected March retail sales data, finally pushed the leading averages back above levels reached before a slump in late February.
At late-afternoon, the S&P 500 had closed up 1.1 per cent at 1,468.47, a six and a half year high and above its late February peak of 1,456.95. The Nasdaq Composite index was 1.1 per cent firmer at 2,58.33.
The Dow Jones Industrial Average gained 0.85 per cent to 12,720.46 and was shy of its record close of 12,786.64 that it set in mid-February.
For the year, the Dow’s rise of 2.05 per cent lags behind the S&P’s 3.5 per cent advance, the Nasdaq’s rally of 4.25 per cent and the Russell 2000 index of small companies’ gain of 5.55 per cent.
Leading the charge in deals on Monday was a $25bn buy-out of SLM, the provider of student loans also known as Sallie Mae. The deal was concluded by two private equity firms and two banks, JP Morgan Chase and Bank of America.
Sallie Mae rose 18.4 per cent to $55.35, building on a 14.75 per cent rally on Friday when speculation of a deal surfaced.
Shares in JPM rose 1.8 per cent to $49.97, and BofA was up 1.6 per cent at $51.23.
Another large bank in the news was Citigroup, which reported a first quarter profit decline of 11 per cent.
Excluding a charge for its recently announced restructuring, the bank’s profit would have exceeded forecasts amid higher revenues and its shares rose 2.6 per cent to $52.93.
Shares in Wachovia, the the fourth-largest bank in the US, rallied 2 per cent to $55.06, after it reported a 33 per cent rise in first quarter profit that beat estimates.
Earnings and deals news sparked a rally in banks that helped the S&P financial sector pare its loss for the year to just under 1 per cent.
“The financials have not been going anywhere lately, they tend to lead any major bull move,” said William Strazzullo, chief market strategist at Bell Curve Trading.
“The short-term momentum is bullish for stocks,” he said, highlighting that a relief rally was occurring as investors had priced in the worst possible case for earnings.
In recent weeks, profit forecasts have been lowered sharply, and investors have been quick to buy shares in companies that beat estimates.
Eli Lilly, the pharmaceutical company, rose 2.7 per cent to $58.40, after its first quarter profits fell 39 per cent, but were above expectations once special items were taken into account. It raised its full-year sales and earnings guidance.
Google rose 1.7 per cent to $474.27 after buying DoubleClick, a marketing services company, for $3.1bn in cash late on Friday.
Mattel slipped 0.85 per cent to $28.10 although the toymaker’s results beat estimates.