Rally Lifts Dow And S&P 500 To Record Closing Highs - U.S. Commentary

(RTTNews) - After turning in a mixed performance last week, stocks moved sharply higher over the course of the trading day on Monday. With the gains on the day, the Dow and the S&P 500 both ended the session at new record closing highs.

The major averages ended the day firmly in positive territory, with the tech-heavy Nasdaq posting a standout gain. While the Nasdaq surged up 71.99 points or 1.8 percent to 4,143.86, the Dow advanced 112.13 points or 0.7 percent to 16,695.47 and the S&P 500 jumped 18.17 points or 1 percent to 1,896.65.

The strength on Wall Street was partly due to news of Chinese market reforms designed to increase liquidity, which helped offset concerns about the situation in Ukraine.

Pro-Russian separatists in the Donetsk region of eastern Ukraine claim nearly 90 percent of voters in the region were in favor of self rule in a referendum held on Sunday, although the vote has been condemned as illegal by Kiev and Western governments.

"Optimism about capital market reforms in China helped markets to look past the farce of a referendum in the Donetsk region of Ukraine," said Peter Boockvar, chief market analyst at the Lindsey Group.

He added, "While vague and stated 6 months ago after the Chinese plenum, investors seized on the Chinese State Council repeating their desire to further liberalize China finance in areas such as IPO's and foreign investment in state owned companies."

Additional news on the merger-and-acquisition front also generated some positive sentiment, with shares of Pinnacle Foods (PF) surging up by 13.2 percent after the company agreed to be acquired by Hillshire Brands (HSH).

Hillshire entered into a definitive agreement to acquire all outstanding shares of Pinnacle in a cash and stock transaction with a total enterprise value of $6.6 billion. The combination is expected to be immediately accretive to earnings.

Meanwhile, Allergan (AGN) said its board unanimously rejected an unsolicited $47 billion takeover offer from Valeant Pharmaceuticals (VRX), arguing that the proposal substantially undervalues the company.

Sector News

While most of the major sectors moved to the upside on the day, internet stocks posted particularly strong gains. The Dow Jones Internet Composite Index surged up by 3.2 percent, climbing further off the seven-month closing low it set last Thursday.

Twitter (TWTR) turned in one of the internet sector's best performances, with the social media giant jumping by 5.9 percent after being upgraded to Buy at SunTrust Robinson Humphrey.

Airline stocks also moved sharply higher over the course of the trading day, driving the NYSE Arca Airline Index up by 3 percent. With the gain, the index ended the session at its best closing level in twelve years.

Considerable strength was also visible among steel stocks, which benefited from optimism regarding the news out of China. Reflecting the strength in the sector, the NYSE Arca Steel Index advanced by 2.9 percent.

Networking, biotechnology, brokerage, and software stocks also saw significant strength on the day, while utilities stocks were among the few groups to buck the uptrend.

Other Market

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index surged up by 1.8 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index jumped by 1.3 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index rose by 0.6 percent and 0.4 percent, respectively.

In the bond market, treasuries moved moderately lower, extending the pullback seen in the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.3 basis points to 2.656 percent.

Looking Ahead

Following today's lack of major U.S. economic data, the economic calendar will pick up on Tuesday with the release of reports on retail sales, import and export prices and business inventories.