M&A, Earnings News Leads To Continued Strength On Wall Street - U.S. Commentary

(RTTNews) - After trending higher over the past several sessions, stocks saw some further upside during trading on Tuesday. A positive reaction to the latest corporate news contributed to the continued buying interest, lifting the Dow and the S&P 500 back near their record highs.

The major averages pulled back off their best levels of the day going into the close but remained firmly positive. The Dow climbed 65.12 points or 0.4 percent to 16,514.37, while the Nasdaq jumped 39.91 points or 1 percent to 4,161.46 and the S&P 500 rose 7.66 points or 0.4 percent to 1,879.55.

The continued strength on Wall Street partly reflected the positive sentiment generated by news on the merger-and-acquisition front.

Shares of Allergan (AGN) surged up by 15.3 percent on news that Valeant Pharmaceuticals (VRX) has offered to buy the Botox maker for approximately $45 billion.

Under the terms of the proposal, each Allergan share would be exchanged for $48.30 in cash and 0.83 shares of Valeant common stock.

Additionally, Novartis (NVS) agreed to buy GlaxoSmithKline's (GSK) cancer drug business for about $16 billion while also agreeing to sell its animal health business to Eli Lilly (LLY) for about $5.4 billion.

The latest M&A news comes on the heels of yesterday's reports indicating that Pfizer (PFE) had been in negotiations to acquire AstraZeneca (AZN) for $101 billion.

Traders were also reacting to the latest earnings news, with shares of Netflix (NFLX) moving sharply higher after the video streaming service reported its first quarter results.

Netflix reported first quarter earnings that came in above analyst estimates and provided upbeat guidance. The company also announced plans to raise prices for new subscribers.

Harley-Davidson (HOG), Xerox (XRX) and United Technologies (UTX) also moved higher on the day after reporting better than expected first quarter earnings.

On the economic front, the National Association of Realtors released a report showing a smaller than expected drop in existing home sales in the month of March.

NAR said existing home sales edged down 0.2 percent to a seasonally adjusted annual rate of 4.59 million in March from 4.60 million in February. Economists had been expecting existing home sales to drop to an annual rate of 4.56 million.

While the drop was smaller than expected, existing home sales still fell for the seventh time in eight months and hit their lowest level since July of 2012.

Sector News

Biotechnology stocks turned in some of the market's best performances on the day, resulting in a 3 percent jump by the NYSE Arca Biotechnology Index. With the gain, the index climbed further off last week's three-month closing low.

Nektar Therapeutics (NKTR) helped to lead the biotech sector higher, surging up by 11 percent, while InterMune (ITMN), Pharmacyclics (PCYC), and Illumina (ILMN) also posted strong gains.

Significant strength also emerged among brokerage stocks, as reflected by the 1.6 percent gain posted by the NYSE Arca Broker/Dealer Index. The index continued its recovery from the five-year month closing low set earlier this month.

With Allergan helping to lead the way higher, considerable strength was also visible in the pharmaceutical sector. The NYSE Arca Pharmaceutical Index rose by 1.5 percent to its best closing level in well over a month.

Gold, electronic storage and networking stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index dropped by 0.9 percent, while China's Shanghai Composite Index rose by 0.3 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the German DAX Index soared by 2 percent, the French CAC 40 Index surged up by 1.2 percent and the U.K.'s FTSE 100 Index advanced by 0.9 percent.

In the bond market, treasuries recovered from an early move to the downside and closed roughly flat for the second straight day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.726 percent.

Looking Ahead

Earnings news is likely to remain in focus during trading on Wednesday, with Boeing (BA), Delta (DAL), Procter & Gamble (PG), and Dow Chemical (DOW) among the companies due to report their quarterly results before the start of trading.

More housing data may also attract some attention, as the Commerce Department is scheduled to release its report on new home sales in the month of March.