Exxon deal boosts hopes for M&A
US stocks closed at 14-month highs yesterday as Abu Dhabi’s $10bn (£6bn) in aid to help Dubai avoid default eased concerns and a takeover deal by Exxon Mobil Corp raised optimism about mergers and acquisitions activity.
Citigroup plan to repay the U.S. government about $20bn in bailout funds also helped buttress the buoyant mood a week after Bank of America fully repaid its $45bn government loan.
Exxon Mobil said it would buy natural gas supplier XTO Energy in an all-stock transaction valued at about $30bn, excluding debt.
Abu Dhabi said it will provide Dubai $10bn in bailout money, with $4.1bn for payment on a maturing bond.
“It certainly eases the strain on European banks and that, in turn, increases confidence in the financial system in general,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments.
“We’ve seen in the last 18 months how these things can spiral out, if you will, from what appears to be well contained to envelop firms all over the world.”
The Dow Jones industrial average gained 29.55 points, or 0.28 per cent, to end at 10,501.05. The Standard & Poor’s 500 Index .SPX rose 7.70 points, or 0.70 per cent, to 1,114.11. The Nasdaq Composite Index .IXIC climbed 21.79 points, or 0.99 per cent, to close at 2,212.10.
The closing levels for the Dow and the S&P 500 represent 14-month highs, while the Nasdaq ended at its highest level in 15 months.
Citigroup laid out a plan to repay the money it owes the U.S. government, including raising money by selling $17bn of common stock immediately, as the bank looks to end the restrictions on executive pay that came with the funds.
Citi’s stock slumped 6.3 per cent to $3.70.
Shares of XTO surged 15.4 per cent to $47.86.In contrast, Exxon Mobil shed 4.3 per cent to $69.69 and ranked as the top drag on the Dow.
The NYSE Arca Natural Gas index gained 4.5 per cent.
The First Trust ISE-Revere Natural Gas Index Fund, an exchange-traded fund of natural gas companies’ shares, rose 5.3 per cent. XTO has underperformed that ETF by roughly 14 per cent this year.
Sun Microsystems shares jumped 11 per cent to $9.28 on Nasdaq after European Union regulators signaled they could clear Oracle Corp’s $7bn takeover of Sun after Oracle promised measures to ease competition concerns.