China central bank governor’s indications about additional monetary stimulus and a slew of new deals in the healthcare sector helped benchmarks start the holiday shortened week on a positive note. China’s move to ease lending requirements for buying a second home also added to the bullish sentiment. While all 10 sectors of the S&P 500 ended in the green, 28 out of Dow’s 30 components ended in positive territory.
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The Dow Jones Industrial Average (DJI) gained 1.5% or 263.65 points to close at 17,976.31. The Standard & Poor’s 500 (S&P 500) advanced 1.2% to 2,086.24. The tech-laden Nasdaq Composite Index closed at 4,947.44; increasing almost 1.2%. The fear-gauge CBOE Volatility Index (VIX) declined 3.7% to settle at 14.51. A total of about 5.8 billion shares were traded on Monday, lower than the month-to-date average of 6.7 billion. Advancers outpaced declining stocks on the NYSE. For 72% stocks that advanced, 25% declined.
Benchmarks advanced significantly on Monday boosted by the People’s Bank of China governor Zhou Xiaochuan’s dovish comments. Xiaochuan said there is “more room” for China to ease its monetary policy provided China’s economic growth slows down further and inflation continues to weaken. Xiaochuan warned about the threat of deflation in China amidst a drop in global commodity prices. He also sees risks of a “too strong” U.S. dollar as that might cause capital to flow out from China and into the U.S. markets.
Additionally, China’s efforts to support its struggling housing market also boosted investor sentiment. China trimmed downpayment requirements for its homebuyers for the second time in six months in order to curtail the slide in its home prices. On Monday, the People’s Bank of China, the housing ministry and the banking regulator in a joint statement said minimum down payment for buyers of second homes would be lowered to 40% from an earlier rate of 60%.
A flurry of deal news in the domestic healthcare sector also aided benchmarks to post solid gains for the second straight session. Shares of Catamaran Corporation soared 23.8% after OptumRx Corp, a unit of UnitedHealth Group Incorporated , agreed to acquire the company in a deal worth around $12.8 billion in cash, or $61.5 per share. Shares of UnitedHealth Group also gained 2.5%.
Among other deals, Teva Pharmaceutical Industries Limited agreed to buy Auspex Pharmaceuticals, Inc. for $3.2 billion in cash, or $101 a share. Ireland’s Horizon Pharma plc said it would buy Hyperion Therapeutics, Inc. in an all-cash deal valued at about $1.1 billion, or $46 per share. Shares of Teva Pharmaceutical, Auspex, Horizon Pharma and Hyperion increased 0.9%, 41.5%, 18.2% and 7.6%, respectively.
Meanwhile, growing concerns about abundant supply of oil and worries over an Iranian nuclear deal dragged oil prices down on Monday. WTI crude and Brent crude declined 0.4% and 0.2% to $48.68 per barrel and $56.29 a barrel, respectively. However, energy shares bucked the negative impact of lower oil prices and ended in the green. The Energy Select Sector SPDR (XLE) increased almost 2.2%, the highest gainer among the S&P 500 sectors. Dow components Exxon Mobil Corporation and Chevron Corporation both advanced 2.5%. Other key energy stocks such as EOG Resources, Inc. , Kinder Morgan, Inc. and Transocean Ltd. gained 1.7%, 1.9% and 1.5%, respectively.
Meanwhile, according to the Bureau of Economic Analysis, personal consumption expenditure increased 0.1% in February, less than the consensus estimate of a 0.3% increase. However, February’s gain was an improvement over January’s decline of 0.2%. Personal income increased 0.4% in February, more than the consensus estimate of a 0.3% gain. The rise in personal income follows a 0.4% increase in January.
Separately, the National Association of Realtors reported that Pending Home Sales Index, a forward looking indicator based on contract signings, went up 3.1% to 106.9 in February, its highest level since Jun 2013. The rise in pending home sales in February was well ahead of the consensus expectation of a 0.5% increase.
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