U.S. equities climbed higher on Monday as investors forgot all about spooky Friday the 13th losses and bid prices higher.
There was no single major catalyst for the move, just a series of confidence-restoring headlines, including a $5.2 billion purchase of Anacor Pharmaceuticals Inc (NASDAQ:ANAC) by Pfizer Inc. (NYSE:PFE), the disclosure of a stake in Apple Inc. (NASDAQ:AAPL) by Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) and a rise in crude oil. Buffett is also reportedly in the hunt with Quicken Loans Inc. founder Dan Gilbert to bid for the internet assets of Yahoo! Inc. (NASDAQ:YHOO).
In the end, the Dow Jones Industrial Average gained 1%, the S&P 500 gained 1%, the Nasdaq Composite gained 1.2% and the Russell 2000 finished with a 1.3% gain.
Treasury bonds were weaker, the dollar was little changed, gold gained a fraction, and crude oil gained 3.7% to close at $47.91 a barrel. Energy got a lift from a bullish note from Goldman Sachs analysts featuring a price target increase on supply outages in Nigeria, Libya and elsewhere.
Energy stocks led the way with a 1.6% gain while utility stocks were the laggards, up just 0.1%. ANAC gained 57.2% on the PFE deal report. AAPL gained 3.7%. Last week, Edge Pro subscribers closed their position in the May $107 AAPL puts for a 283% gain.
Yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU) lost 1.3% after analysts at Bank of America Merrill Lynch reinstated coverage with a bearish outlook citing risks from heightened competitions and the need for ongoing investments to support an international expansion.
Investors largely shrugged off additional hawkish commentary from Federal Reserve officials and some weak economic data here at home and in China.
On Friday, San Francisco Fed President John Williams said that two or three rate hikes this year makes sense (vs. the single hike the market is currently pricing in) based on persistent strength in the labor market and a stabilization in inflation. Richmond Fed President Jeffery Lacker said that the case for hiking rates in June was “pretty strong.”
In China, a softening of the economic data in April from March didn’t come as much of a surprise given Beijing’s efforts to turn down its level of policy support. Industrial production grew 6% vs. expectations for 6.5% and last month’s 6.8% result. Fixed-asset investment, retail sales and new loans all also dropped vs. March, missing expectations.
Here at home, the Empire Statement manufacturing activity report fell hard in May vs. April with new orders and shipments indicating month-over-month contraction.
On a technical basis, the situation still looks vulnerable as the Dow merely managed to recover from the big breakdown suffered on Friday. But breadth continues to narrow and volume was light. Can the recovery last?
Much will depend on the contents of the Federal Reserve’s April meeting minutes on Wednesday.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
