Wall Street managed a respectable advance Monday in the face of robust new figures for the U.S. economy and an uptick in bond yields, the sort of news that has sent prices downward since February.
After turning down in initial trading, the market rallied on news of a bid by Roche Holding of Switzerland to buy Syntex, a pioneer generic drug company, for $5.3 billion. Syntex took off, rising $8.25 to $23.50 after languishing in price for more than a year. It carried most of the pharmaceutical sector along with it.
The drug industry has been due for a return to stock stardom, even if only for a day, after being beaten down ever since the Clinton administration took office and began its health-reform drive. Before that, health stocks were the darlings of institutional managers, racking up frequent 30 percent-plus annual gains in the 1980s.
The Dow Jones industrial average finished the day up 19.33 at 3701.02, and the Nasdaq index climbed 6.84 points to 740.68. Volume on the Big Board was nearly 300 million shares.
The big names in the drug industry rose smartly. Abbott Laboratories, based in North Chicago, gained 62 cents to $29; Merck gained $1.50 to $31.12; Pfizer rose $2.12 to $61.12; Eli Lilly jumped $2.50 to $51.75; Schering-Plough rose $2.25 to $63.25; and Upjohn vaulted $2 to $28.75.
“If some major drug company thinks that Syntex is 60 percent more valuable than the market, people start thinking maybe they are undervaluing the group as a whole,” said Albert Goldman, director of technical research at A.G. Edwards & Sons in St. Louis.
Monday’s perhaps temporary decoupling of the U.S. market from interest rates left foreign markets freer to react to local conditions. Many stock markets in countries closely tied to the U.S. economy have been moving up and down in near-lockstep with Wall Street’s inflation fears.
The Mexican market, for example, had a bad day Monday apparently on concern about poor company earnings reports last week and continuing political uncertainty after a series of shocks including two political assassinations, two kidnappings and the Chiapas uprising.
The Mexican bellwether Telmex, the telephone company found in the portfolio of many international mutual funds, lost $1.25 to $57.62 on the New York Stock Exchange. In Mexico, the market fell 2.76 percent.
In the U.S., the yield on the benchmark 30-year Treasury bond rose to 7.33 percent from 7.31 percent Friday.
In addition, the National Association of Purchasing Managers reported a rise in manufacturing activity in April, to an index reading of 57.7 from 56.7 in March. Economists had expected a drop to about 56.1.
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For weeks, that sort of surprise has caused shock waves on Wall Street. Even solid earnings news has been seen as upsetting, ever since April 12 when Motorola announced earnings a penny below mean expectations and saw its share price drop from the equivalent of $53.50-the company had a 2-for-1 stock split in late April-to its present level of $44 a share.
That effect appears to be moderating.
“With the economy as strong as it is, earnings will continue to surprise on the upside,” said James Solloway, director of research at Argus Research. “A little too much has been made of the negative impact higher rates will have on corporate profits.”
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Roll the windows down, turn the radio on and let the spring air refresh the auto stocks.
Few truths about the U.S. economy run as deep as the effect of auto sales, which have been surging for a year. The more cars the country builds, the more steel it uses, the more auto parts the Big Three order and the more highly paid autoworkers keep their jobs and rack up overtime. Autos and housing still form an economic backbone.
Auto stocks have been under pressure the past two weeks as analysts warned that the business cycle may be topping and it may be time to dump stocks of auto and heavy-machinery companies closely tied to the twists and turns of the economy.
But the manufacturing report sent all three U.S. auto stocks higher. It amounts to a vote of confidence for the economy.
General Motors gained 87 cents to $57.62; Ford picked up $1.62 to $60; and Chrysler added 50 cents to $48.25. Heavy-machinery-makers also were up: Peoria-based Caterpillar rose $1.12 to $111 and Deere of Moline added 62 cents to $77.25.