Deal surge and healthy indicators push markets to new high

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By Tobias Burns

US stocks hit a five-year high on Tuesday, spurred on by investor optimism over recently announced acquisitions and upbeat economic indicators.

The Standard & Poor’s 500-stock index rose 10.48 points, or 0.51 percent, to close at 2,051.80. The Dow Jones Industrial Average gained 40 points, or 0.23 percent, to close at 17,687.82. The NASDAQ Composite Index was up 31.44 points, or 0.67 percent, to close at 4,702.44.

“Right now we’re seeing renewed confidence in the domestic economy,” said Paul Nolte, an analyst at Kingsview Asset Mangement, in an interview over the phone, “especially given mediocre performance in Europe, and Japan falling into technical recession.”

Earlier today, Japanese Prime Minister Shinzo Abe responded to the move of his country’s economy into recession by calling for a snap election and a postponement of a sales tax increase.

In the U.S., another round of major acquisitions announced Monday continued to push the deal stocks higher. 

Pharmaceutical giant Actavis plc’s agreement to purchase Allergan, Inc., maker of the popular drug Botox, and the proposed sale of Baker Hughes Inc. to energy conglomerate Halliburton Company have pushed the volume of mergers and acquisitions well over $1.5 trillion on the year.

In the Allergan deal, both the buyer and the seller saw substantial gains. Allergan shares were up $4.22, or 2.02 percent, to close at $213.37 per share. Shares of Actavis jumped $21.66, or 8.74 percent, to $269.60 per share.

“These moves aren’t necessarily signs of overall strength, though,” said Nolte. “They’re really about increasing revenues in a period of global uncertainty.”

Major technology stocks also felt the benefits of the day’s momentum. Apple rose $1.48, or 1.3 percent, to close at $115.47 per share

The Producer Price Index, which measures the price of goods ordered by domestic producers and manufacturers, climbed 0.2 percent on the month to hit a tame 1.5 percent increase since this time last year.

This will likely keep the Federal Reserve from raising interest rates in the immediate future.

“PPI inflation looks set to remain modest with input prices slipping, even excluding food and energy prices,” Sam Bullard, a senior economist at Wells Fargo, said in a statement.

Bond prices firmed on the day; the yield on the 10-year note dropped 0.77 of a percentage point to 2.32 percent.

Urban Outfitters was the day’s biggest loser, falling 6.6 percent to $28.79 per share after earnings fell below expectations.

Home Depot, one of the 30 blue chip shares that make up the Dow Jones Industrial Average, also took a hit, slipping by more than 2 percent to $95.98 also on lower-than-expected earnings.