Wall Street was up more than one per cent yesterday, bouncing back sharply from last week’s steep lows, buoyed by optimism around China and Greece, and as Warren Buffett’s latest billion-dollar deal showed the M&A boom was alive and well.
Disappointing data out of China boosted hopes for additional stimulus from Beijing, while Greece and international creditors could wrap up a multi-billion euro bailout accord by today.
Buffett’s Berkshire Hathaway said it would buy Precision Castparts in a deal valuing the company at $32.3 billion. Precision Castparts’ shares jumped as much as 19.4 per cent to $231.47, while Berkshire Class B shares fell 1.4 per cent to $141.60.
“The market took their cues from China overnight, and the Berkshire deal is another factor driving investor sentiment today,” said Aaron Clark, a portfolio manager at GW&K Investment Management, which oversees about $25 billion.
With US interest rates near zero for nearly a decade, debt has been cheap. But with the Federal Reserve widely expected to hike rate later this year, merger and acquisition activity has increased.
July was the seventh strongest month for global deal activity since 1980. Up to the end of July, cross-border M&A activity totaled $913.5 billion, up 23 percent from a year ago, according to Thomson Reuters data.
“M&A will continue to be robust because funding is still cheap and excess cash needs to be invested,” said Clark. “We are also seeing a lot of activist investor activity.”
At 12:56am ET (16:56 GMT) the Dow Jones industrial average was up 223.03 points, or 1.28 per cent, at 17,596.41. The S&P 500 was up 24.4 points, or 1.17 per cent, at 2,101.97 and the Nasdaq composite was up 53.59 points, or 1.06 per cent, at 5,097.13.
Nine the 10 major S&P sectors were higher, led by the energy index’s 2.3 percent hike as oil prices edged up from six-month lows.
Apple 3.3 per cent rise gave the biggest boost to all three major indexes.
In other deal news, ammonia maker CVR Partners’ deal to buy Rentech Nitrogen Partners for about $533 million sent Rentech soaring 26.6 per cent to $13.04.
US stocks ended lower on Friday, with the Dow closing down for the seventh straight day, after solid July jobs data pried the door open a little wider for a potential rate hike in September.
The Fed has said it will raise rates only when it sees a sustained recovery in the economy. Though the labor market has rebounded, inflation rate stays below the two per cent target.
Atlanta Fed President Dennis Lockhart said economic conditions have largely returned to normal and a decision to raise interest rates should come soon.