New York: As traders finished the last full week of business before Thanksgiving, Wall Street was feeling grateful for a week of fresh records, central bank stimulus and big corporate mergers.
The Dow Jones Industrial Average rose 175.32 points (0.99 per cent) to 17,810.06, while the S&P500 gained 23.68 (1.16 per cent) to 2,063.50. Both indices closed the week at all-time highs.
The tech-rich Nasdaq Composite Index added 24.43 (0.52 per cent) at 4,712.97.
By far the strongest day of trade came Friday when central bank news lifted global stock markets.
The People’s Bank of China unexpectedly cut benchmark interest rates for the first time in more than two years, while European Central Bank President Mario Draghi also lifted hopes for more stimulus, saying it would act “without any undue delay” to address deflation.
The news constituted the latest evidence of the staying power of central bank largesse.
“Investors have been saying, ‘I would like more please,’ and central banks in Europe and China have delivered,” said Alan Skrainka, chief investment officer at Cornerstone Wealth Management. “It’s just the prescription the doctor ordered.”
Friday also demonstrated the positive potential of activist investors on individual stocks following three big activist wins.
Dow Chemical reached a compromise with Third Point’s Daniel Loeb to appoint four independent directors, ending the threat of a proxy fight. Only hours earlier, Sotheby’s, another Loeb target, said it would replace chief executive William Ruprecht, whom Loeb had sharply criticised.
Also, Hertz Global Holdings, a target of veteran activist Carl Icahn, tapped former United Airlines chief operating officer John Tague as its new chief executive with the blessing of three board members picked by Icahn.
Shares of Dow, Sotheby’s and Hertz all rose sharply following the announcements.
Major buyouts in the energy and pharmaceutical businesses meanwhile underscored that mega-merger fever was alive and well on Wall Street.
In rapid succession on Monday, pharmaceutical giant Actavis said it would pay $66 billion for Allergan, which makes the wrinkle-eraser Botox, and oilfield services company Halliburton said it would take over rival Baker Hughes for $34.6 billion.
Mergers and acquisitions around the world so far this year have hit $3.16 trillion, according to Dealogic, the highest level since the record year of 2007. Major drivers of deals include cheap financing and a desire of companies to move beyond their core functions to grow.
Investors were also cheered by a generally positive batch of earnings results from leading retailers ahead of the key holiday shopping period.
Good earnings reports came from retailers in kitchen equipment (Williams-Sonoma), office goods (Staples), electronics (Best Buy) and home improvement (Lowe’s). Department store Target also bested expectations.
Clothing chains Gap and Urban Outfitters disappointed, while electronics vendor Best Buy warned of heavy discounting this season that could stifle profits.
Still, Art Hogan, chief market strategist at Wunderlich Securities, said the results “very encouraging” on the whole and reflect the economic tailwinds of lower energy costs and an improved US labour market.
Markets next week will get a fresh sense on consumer sentiment when the Conference Board releases its reading of consumer confidence for November.
Other data in the holiday-shortened week include the second estimate for third-quarter economic growth and durable goods orders for October.
There will also be earnings reports from Tiffany and Hewlett-Packard, as well as meeting of the Organisation of Petroleum Exporting Countries that is being closely watched by the oil market.
