NEW YORK: US markets brushed aside turmoil in the Middle East and Japan's nuclear troubles to rack up strong gains Monday, with AT&T's mega-deal to buy T-Mobile driving trader optimism. The Dow Jones Industrial Average closed up 178.01 points (1.50 percent) at 12,036.53. The broader S&P 500 rose 19.18 (1.50 percent) to 1,298.38, while the tech-heavy Nasdaq Composite gained 48.42 points (1.83 percent) at 2,692.09. The market got a strong push from AT&T's plan to buy T-Mobile USA in a $39 billion deal that would make it the country's largest cell phone carrier, and the US Treasury's decision to begin selling off $142 billion worth of mortgage-backed securities, seen as a signal that markets are getting stronger.
"As the bullish stars aligned, investors essentially shrugged off a 10 percent drop in existing-home sales last month, as well as embattled Libyan leader Moamer Qadhafi's vow to wage a 'long war' against his opponents," said Andrea Kramer of Schaeffer's Investment Research. The AT&T deal and the purchase of OptionsXpress by broker firm Charles Schwab were "amplifying optimism about the collective corporate pocketbook," she said. AT&T's purchase of T-Mobile from Deutsche Telekom, announced over the weekend, marked a strong shift in the foundation of the US cell phone market, if it gets approval from regulators wary of market consolidation. The combination of the second and fourth largest operators would put them ahead of leader Verizon, and leave current third-place Sprint Nextel far behind. AT&T shares picked up 1.2 percent for the day, while Verizon added 1.7 percent and Sprint plunged 13.6 percent. Citigroup got a no-vote from investors on its announcement of a reverse stock split, to reduce by 90 percent the number of outstanding shares, and the resumption of dividend payments, albeit at the ultra-low one cent a share. The stock ended down 1.5 percent on the news, though it came on the tail of stress-testing by the central bank that signalled that the banking sector was emerging from the financial crisis of the past three years. Tech stocks were pulled up by solid gains from Microsoft (up 2.1 percent), Cisco (up 1.4 percent), and Apple (up 2.6 percent). Traders appeared to ignore the worse-than-expected 9.6 percent drop of sales of existing homes in February, after rising for three straight months. It was the newest sign that the housing sector continues to drag on US economic revival. The National Association of Realtors, which released the data, blamed "unnecessarily" tight bank credit for the downward trend.
"Housing affordability conditions have been at record levels and the economy has been improving," said NAB economist Lawrence Yun. Bond prices fell, with the yield on the 10-year Treasury rising to 3.32 percent against 3.28 percent late Friday, and the 30 year moved 0to 4.45 percent from 4.43 percent. Bond prices move contrary to their yields.
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