|Street rallies ahead of US Fed meeting
US stocks broke through a slump and posted strong gains Monday, powered by two big corporate deals and a report that suggests the economy is getting stronger.
The Dow Jones industrial average is now up two trading days in a row and has reduced some of the losses from last week. It was the first gain in five days for the Standard & Poor's 500 index.
Stocks have turned volatile ahead of a Federal Reserve meeting that begins Tuesday, as investors bet on whether the central bank will dial back the stimulus that has boosted stock prices this year. All of the big indexes are up more than 20 percent for 2013.
Karyn Cavanaugh, market strategist with ING U.S. Investment Management, said she does not expect such large returns next year _ maybe more like 10 percent.
“But that's actually good for investor confidence,'' she said. “When they see these big huge numbers, I think they look at it with kind of a jaded eye and think, `Is that really sustainable? Maybe it's already run its course so I want to get out.'''
At the closing bell, the Dow Jones Industrial Average rose 129.02 points (0.82 percent) to 15,884.38.
The broad-based S&P 500 gained 11.23 (0.63 percent) at 1,786.55, while the tech-rich Nasdaq Composite Index rose 28.52 (0.71 percent) to 4,029.50.
Two major deals caught investors' attention: Chipmaker Avago Technologies is buying LSI Corp. for US$6.6 billion. Avago was up US$4.47, or 10 percent, to US$50.12, while LSI gained US$3.05, or 39 percent, to US$10.97. And AIG is selling its aircraft leasing business for about US$5.4 billion to Dutch leasing company AerCap. AIG has been selling major assets after getting a bailout during the financial crisis. Its shares gained 50 US cents, or 1 percent, to US$50.23.
The Avago-LSI deal helped make tech stocks the biggest gainers among the 10 industries in the S&P 500, all of which advanced.
Also Monday, the Federal Reserve said factory production accelerated in November as auto production surged. The gains in manufacturing could help boost economic growth.
The Fed will release a statement and projections for the economy Wednesday. Economists are almost unanimous in believing that the Fed will not begin winding down its stimulus program just yet.—AP/AFP