Stocks rang up a solid advance Monday, paced by a couple of individual big gainers. Combined with Friday’s upturn, equities have, for the first time this month, closed higher for two sessions in a row.
Wall Street has been waiting, with a certain amount of unease, to sift through the deluge of third-quarter earnings reports that starts this week. If it turns out that higher energy costs or interest-rate hikes have caused earnings to grow at anything less than the robust, double-digit rate that has been widely predicted, the stock market is likely to come under pressure.
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Monday, the Dow Jones industrial average climbed 60.76 points, or 0.6 percent, to close at 10,348.10. To a large extent, however, as A.G. Edwards market strategist Al Goldman observed, “It was a tale of two stocks on Wall Street” on Monday.
The Dow’s upturn was indeed led by outsized jumps in the stocks of two major components.
General Motors shares climbed 7.5 percent, to $30.09, on heavy volume, after the auto giant reached agreement with the United Auto Workers on crucial health-care cost reductions.
And shares of Altria, parent of cigarette producer Philip Morris, climbed 6.1 percent, to a 52-week high of $74.96, after the U.S. Supreme Court opted to let stand a favorable appeals-court ruling that limits the cigarette industry’s financial exposure in a major tobacco-liability lawsuit.
Industrial bellwether 3M, scheduled to report earnings Tuesday, rose 2.5 percent, to $72.47. But numerous other blue chips ended the day modestly lower, including Verizon, Procter & Gamble and General Electric.
IBM is likely to be an active stock Tuesday. After the close of trading Monday, it reported stronger-than-expected earnings, sending shares smartly higher in after-hours trading.
Markets were tempered by a hefty rise in the price of oil, which reflected traders’ fears that a tropical storm now in the Caribbean could turn into yet another hurricane that could pose a threat to Gulf Coast oil facilities.
Crude oil for November delivery climbed $1.73 in New York Mercantile Exchange trading, to $64.36 a barrel.
Broader indexes showed less pop than the Dow.
The Standard & Poor’s 500 index added 3.53, or 0.3 percent, to 1190.10. And the tech-heavy Nasdaq composite index, after spending much of the day in negative territory, strengthened late in the session to end the day up 5.47, or 0.3 percent, to 2070.30.
A stock for gamblers? When a friendly buyout is pending, it’s normal for the price of the target company to trade at a slight discount to the buyout price. If the deal doesn’t close for a couple of months, then stockholders’ money is tied up and unusable for other investments.
And there’s always a chance the deal could unexpectedly come apart, if, for example, the buyer makes some 11th-hour discovery of shenanigans in the target company’s books or federal regulators decide the deal might reduce competition.
That explains why TBC Corp. shares closed Monday at $34.67, less than 1 percent below the $35-a-share offer price the company accepted last month from Sumitomo. Lots of other stocks in the same situation trade at a 2 or 3 percent discount to the offering price.
Then there’s Maytag, which agreed in August to a $21-a-share buyout bid from industry rival Whirlpool. It has never been any secret that the combination of two of the nation’s biggest appliance makers will get a long, hard look from federal antitrust regulators.
Soon after the deal was announced, Maytag shares peaked at $19.01, a hefty 9.5 percent discount to the buyout price. But in recent weeks, investors have grown gloomier about prospects for the $1.7 billion deal. Maytag shares have weakened and closed Monday at $16.78, making the “spread” between the buyout price and the trading price a remarkable 20 percent.
Local stocks: W.W. Grainger shares rose 1.8 percent, to $65.02, after third-quarter results from the Lake Forest-based distributor of facilities maintenance products outpaced estimates.
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