Investors propel Dow to its highest level since June 2008

Traders saw big gains for the Dow on Monday, extending its eight-week rally.
Traders saw big gains for the Dow on Monday, extending its eight-week rally. (Seth Wenig)
By Nikolaj Gammeltoft and Rita Nazareth
Tuesday, January 25, 2011

NEW YORK - Stocks advanced Monday, sending the Dow Jones industrial average to its highest level since June 2008, as acquisitions, share-buyback plans and dividend prospects bolstered investors' optimism.

The Dow rose 108.68 points, or 0.9 percent, to 11,980.52, extending gains after an eight-week rally. The Standard & Poor's 500-stock index, a broader measure of U.S. markets, climbed 0.6 percent to 1290.84, its second straight advance.

"Corporate actions, such as buybacks, dividends and M&A, make valuations attractive," said Peter Jankovskis, who helps manage more than $2.6 billion at Oakbrook Investments. "That's an indication of management's confidence in the future. Earnings at U.S. companies have been strong. That's positive for the equity market."

Technology companies, which account for about 19 percent of the S&P 500, had the biggest rally among the 10 main S&P 500 industries, rising 1.6 percent. Shares of Intel gained 2 percent on Monday, spurring a rally in technology stocks, after the chipmaker added $10 billion to its share repurchase plan.

The S&P 500's rebound Monday following the index's first weekly drop since November. The benchmark gauge rose as much as 91 percent from a 12-year low in March 2009 amid government stimulus measures and higher-than-estimated corporate profits.

About three-quarters of S&P 500 companies that have released results since early January have beaten analysts' estimates for earnings per share, according to data compiled by Bloomberg.

Profits grew 25 percent in the fourth quarter and will increase 15 percent in 2011, according to analyst projections. Sales rose 8.6 percent for the group that has reported so far, with energy, technology and raw-materials companies showing the biggest changes, Bloomberg data showed. A total of 127 companies in the S&P 500 are scheduled to report fourth-quarter results this week.

Corporate balance sheets are the strongest on record, according to Goldman Sachs Group strategist David Kostin, who cited data showing companies hold more than $1 trillion in cash, the most ever compared with the value of their assets.

Global mergers and acquisitions increased to $660.8 billion in the fourth quarter, the highest since the third quarter of 2008, according to Bloomberg data. Year-to-date, $118 billion of transactions have been announced with about half of the deals targeting U.S. companies.

- Bloomberg News

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