U.S. stocks rallied Monday, with the Dow Jones industrial average topping 12,000, as concern eased that Japan will suffer a nuclear meltdown and on news that AT&T agreed to buy T-Mobile USA for $39 billion.
The Dow Jones industrial average closed up 178.01, or 1.5%, at 12,036.53; the S&P 500 rose 19.18, or 1.5%, closing at 1,298.38; and the Nasdaq composite was up 48.42, or 1.83%, to close at 2,692.09. All numbers are preliminary.
The Chicago Board Options Exchange Volatility index, which measures the cost of using options as insurance against declines in the S&P 500, slumped 15%, the most since May on a closing basis, to 20.66.
“We ought to be overweight equities,” said Hayes Miller, Boston-based head of asset allocation in North America at Baring Asset Management, which oversees $51.6 billion. “I don’t think that anything that’s happening in Japan or Libya changes the attractiveness of stocks. On top of that, companies have cash and they need to deploy it somehow if they can find accretive deals. The AT&T buyout looks very interesting. Investors are also looking at dividends and buybacks.”
U.S. stocks fell last week, sending the S&P 500 down 1.9%, amid concern that Japan’s nuclear crisis and violence in Libya and Bahrain may curb the economic recovery. The gauge rose on Friday as the Federal Reserve cleared the way for lenders to boost dividends, Libya announced a cease-fire and central banks worked to support Japan’s economy.
Japanese Prime Minister Naoto Kan said progress is being made in restoring power to two reactors at the Fukushima Dai-Ichi plant, which was damaged by the March 11 temblor and ensuing tsunami. In Libya, allied officials said air and missile strikes have effectively grounded Moammar Gadhafi’s air force.
Billionaire investor Warren Buffett said Japan’s record earthquake is a buying opportunity and he won’t sell his shares in the country. Mr. Buffett canceled a trip this week to Japan to visit a factory owned by Iscar Metalworking’s Tungaloy Corp. in Fukushima prefecture, home to the reactor damaged in the March 11 earthquake and tsunami, and the site of the worst nuclear disaster in 25 years. Mr. Buffett’s Berkshire Hathaway owns 80% of Iscar, a maker of cutting tools.
“If I owned Japanese stocks, I would certainly not be selling them because of the events of the past 10 days or so,” said Mr. Buffett, speaking to reporters in the South Korean city of Daegu, where he arrived Sunday to attend a ceremony for a new factory being built by TaeguTec. “Something out of the blue like this, an extraordinary event, really creates a buying opportunity.”
Oil rose as allied air strikes in Libya threatened to prolong a supply disruption in Africa’s third-biggest producer and on concern that escalating turmoil might curtail Middle East shipments.
Crude oil for April delivery increased $1.26 to settle at $102.33 a barrel on the New York Mercantile Exchange. It was the highest settlement since March 10. The April contract expires Tuesday. The more actively traded May futures advanced $1.24, or 1.2%, to $103.09.