The US stock market rebounded as another series of corporate acquisitions stimulated investors to continue a largely uninterrupted months-long buying streak. The Dow Jones industrial average registered its 24th record close this year and the Standard & Poor’s 500 index came within striking distance of its record high. Further than the takeover news, which has offered optimism to the markets for months, a stronger-than-expected reading on consumer response helped investors put on the back burner some concern that consumers unsettled by higher gas prices would pull back on spending and overturn the economy’s smooth slowdown. Announced mergers and acquisitions involving US companies this year has already touched $993 billion, marking 62 percent more than at the same time last year.
A flood of mergers and acquisitions has instilled buoyancy into the market. Among the multibillion-dollar deals announced this week were the purchase of Chrysler by the Cerberus Group; the buying of Bausch & Lomb by investment funds controlled by Warburg Pincus; and the takeover of the online ad agency aQuantive by Microsoft. Recent record acquisitions have been apparently a driving force behind the US market’s surge. Particularly, Microsoft’s recent acquisition of online advertiser AQuantive Inc for about 6 billion dollars has helped push the blue-chip Dow Jones Industrial Average to its ninth record in May.
The latest series of buyouts pointed towards the massive amount of liquidity that has lubricated global stock markets in recent months does not look as if on the edge of evaporating. In addition to it, investors seem to be unfazed by rising oil prices, in its place focusing on corporations’ continued appetite for buyout deals. The disposition of consumers stays crucial to the economy as consumer spending makes up about two-thirds of US economic activity. Other developments that might have given investors further room for confidence, retailers J.C. Penney Co., Kohl’s Corp. and Nordstrom Inc. on Thursday each posted earnings that exceeded Wall Street’s anticipations.
In a separate significant development, bonds slipped as the market seemed to look past China’s announcement of an interest rate hike and a widening of the range at which the yuan can trade. A rising Chinese currency would make Chinese imports less competitive in the US.
