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Stocks rose modestly Monday in a quiet session, supported by merger activity in the basic materials sector and pharmaceuticals industry. Trading volume was low, indicating limited conviction on the part of market bulls; this likely reflects an unwillingness to commit new money ahead of the Federal Reserve's policy statement Thursday, says Standard & Poor's Equity Research.
In Monday's session, the Dow Jones industrial average rose 56.19 points, or 0.51%, to 11,045.28. The broader Standard & Poor's 500 index added 6.06 points, or 0.49%, to 1,250.56. The tech-heavy Nasdaq composite was up 12.2 points, or 0.57%, to 2,133.67.
Equities were weathering a jump in the 10-year Treasury yield to a four-year closing high of 5.239% in response to a report showing new home sales unexpectedly rose 4.6% in May to 1.23 million units.
An uptrend in interest rates globally means investors' recent flight from riskier asset classes may continue, some analysts say. "The risk aversion trade of the past several weeks could have more to go," notes Stephen Roach, chief economist at Morgan Stanley. "Our proprietary risk appetite indicator suggests the current risk aversion move is short by historical standards."
The Fed meeting is the main event on this week's calendar, with an announcement on interest rates due Thursday afternoon.
Market players were digesting a clutch of deal news Monday. Healthcare products maker Johnson & Johnson (JNJ) was lower after reports the company will pay $16.6 billion for the consumer unit of drug maker Pfizer (PFE), which includes brands such as Listerine.
Also on the M&A front, copper producer Phelps Dodge (PD) reportedly is buying Canadian mining companies Inco (N) and Falconbridge (FAL) in a deal valued about $40 billion.
Overseas, Arcelor SA reportedly accepted an offer from rival Mittal Steel worth about $33.7 billion. The combination of the world's two largest steelmakers prompted speculation of further consolidation in the industry, says S&P Equity Research.
The deals follow a flurry of M&A action in the energy sector Friday. Oil and natural gas company Anadarko Petroleum (APC) agreed to buy natural gas producers Kerr-McGee (KMG) and Western Gas Resources (WGR) in deals totaling $21.1 billion in cash, while oil explorer and producer Energy Partners (EPL) agreed to buy oil and gas company Stone Energy (SGY) for $1.4 billion.
The technology sector also saw gains Monday. Software giant Microsoft (MSFT) was higher after billionaire investor Warren Buffett announced he will send about $1.5 billion every year to the Bill & Melinda Gates Foundation.
Meanwhile, Intel (INTC) was up on the anticipated shipment this week of the semiconductor maker's new Xeon line of chips.
Shares in Qualcomm (QCOM) rose after Thomas Wiesel upgraded the maker of chips for wireless products from peer perform to outperform.
In the energy markets, August West Texas Intermediate crude oil futures rose 93 cents to $71.80 a barrel.
European markets finished modestly lower. In London, the Financial Times-Stock Exchange 100 index slipped 10.9 points, or 0.19%, to 5,681.2. Germany's DAX index fell 15.11 points, or 0.27%, to 5,514.63. In Paris, the CAC 40 index was down 16.14 points, or 0.34%, to 4,801.49.
Asian markets finished mixed. Japan's Nikkei 225 index rose 28.36 points, or 0.19%, to 15,152.4. In Hong Kong, the Hang Seng index edged down 4 points, or 0.03%, to 15,804.81. Korea's Kospi index added 9.43 points, or 0.77%, to 1,238.05.
Treasury Market
Treasury yields moved higher after the stronger-than-expected new home sales data. The 10-year note edged down in price to 99-03/32 for a yield of 5.239%, while the 30-year bond slipped to 88-13/32 for a yield of 5.23%.
Hogan is a reporter for BusinessWeek Online in New York
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