Dow Rises to Highest Level Since February
August 20 2018 - 4:56PM
Dow Jones News
By Amrith Ramkumar and Riva Gold
The Dow Jones Industrial Average rose to its highest level since
early February on Monday, lifted by investor optimism about the
latest deal activity and trade developments.
A busy year for mergers and acquisitions continued as PepsiCo
agreed to buy home-carbonation company SodaStream International
Ltd. for $3.2 billion, the latest move by the company to diversify
away from sugary sodas and salty snacks. Pepsi shares closed down
0.1%, while SodaStream added 9.4%.
Meanwhile, Tyson Foods said it would buy Keystone Foods, a
supplier of chicken nuggets to McDonald's and other companies, for
$2.2 billion as part of its strategy to bolster its protein
offerings. Tyson shares rose 1.6%.
Despite worries about weakness in emerging markets and the trade
fight between the U.S. and China, stocks have shown resilience this
summer and M&A activity has surged.
"The signal that we can take away from that is that sentiment
has not been hit sufficiently by the trade uncertainty that it puts
business decisions in question," said Gabriela Santos, global
market strategist at J.P. Morgan Asset Management.
The Dow industrials climbed 89 points, or 0.3%, to 25759 -- its
highest close since Feb. 1 -- while the S&P 500 added 0.2%.
Both indexes have climbed in three straight sessions, with the
S&P 500 closing in on its January record. The tech-heavy Nasdaq
Composite edged up less than 0.1%.
Investors are now waiting to see if the S&P 500 can set a
record after the index came within 0.5% of that level earlier this
month before retreating.
Stocks tied to commodities and global growth lifted large
indexes Monday, with the energy, materials and industrials sectors
rising.
Some analysts expect strong economic and earnings figures to
continue buoying large indexes and were encouraged by the latest
trade headlines late last week. Negotiators from the U.S. and China
have been working on talks to try to end their trade standoff ahead
of planned meetings between President Trump and Chinese leader Xi
Jinping at multilateral summits in November, The Wall Street
Journal reported.
Worries about a growth-hindering trade war have hurt stocks
around the world and other risk assets such as commodities in
recent months. Minutes from the Federal Reserve's August meeting,
due later this week, as well as the Kansas City Fed's annual
Jackson Hole symposium, could show how central bankers view the
latest developments, analysts said.
Investors were also watching the Turkish lira Monday, as the
currency's sharp declines this summer have fueled anxiety about the
declines spreading to other emerging markets. It edged lower
against the dollar Monday.
S&P Global Ratings and Moody's Investors Service on Friday
downgraded Turkey one notch further below investment grade, citing
recent extreme economic and financial volatility.
The Trump administration also rejected an effort by Turkey to
tie the release of a U.S. pastor with relief for a large Turkish
bank facing billions of dollars in U.S. fines, a senior White House
official said.
"When it comes to Turkey specifically, I wouldn't say they're
out of the woods just yet," said Mohammed Kazmi, a portfolio
manager at Union Bancaire Privée, saying the country's central bank
will have to raise interest rates significantly to reassure
investors.
Combining Turkey's situation with a recent strengthening of the
dollar, "it brings the focus back on short-term external debt
levels within emerging markets, especially as it looks like the Fed
will continue hiking [rates]," he said.
Some analysts worry that the dollar's strength could also pose a
challenge for large multinational firms by making U.S. exports less
competitive in global markets. It has also challenged some
commodity investors by making materials priced in dollars more
expensive for overseas buyers.
On Monday, the WSJ Dollar Index, which tracks the dollar against
a basket of 16 other currencies, dropped 0.2%. The yield on the
benchmark 10-year U.S. Treasury note declined to 2.823% -- its
lowest close since May -- from 2.873% Friday. Yields fall as bond
prices rise.
Elsewhere, gains in commodity-linked firms pushed the Stoxx
Europe 600 up 0.6% after the index posted its biggest weekly
decline since June.
Earlier, stocks in Asia were mostly higher Monday after an
upbeat finish Friday on Wall Street. Hong Kong's Hang Seng added
1.4%, while the Shanghai Composite Index rose 1.1% after five
sessions of declines.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and Riva
Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
August 20, 2018 16:41 ET (20:41 GMT)
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