The stock market closed moderately higher on Monday, as low bond yields made equities attractive, while gains in Internet and biotechnology stocks gave the Nasdaq an outsized advance.
The Dow Jones industrial average rose 20.55 points or 0.12 percent, to end at 16,511.86. The Standard & Poor's 500-stock index gained 7.22 points or 0.38 percent, to 1,885.08. The Nasdaq composite index added 35.23 points or 0.86 percent, to 4,125.82.
The American-listed shares of AstraZeneca plunged 12 percent after the British drug maker rejected a sweetened and "final" merger offer from Pfizer that would have created the world's largest pharmaceuticals group. Pfizer shares advanced 0.6 percent.
AT&T lost 1 percent after the telecommunications company said it would acquire DirecTV for $48.5 billion, highlighting AT&T's pressing need for fresh avenues of growth beyond the maturing domestic cellular business. DirecTV shares fell 1.5 percent.
Equities have come under pressure, with consecutive weekly declines for the first time since January, as investors have become leery about growth prospects. Last week, readings on retail sales and consumer sentiment fell shy of expectations while labor and housing data provided reason for optimism.
But with the yield on the 10-year Treasury note at close to 2.5 percent, investors may have been compelled to wade into equities and help keep them afloat.
"Part of this — driven by where rates are at and bonds continuing to rally — when you might look for a pullback in the stock market, that is making stocks look more attractive," said Stephen Massocca, managing director at Wedbush Equity Management.
"It is maybe preventing a decline of which we are a little overdue in the stock market, from a valuation perspective," he said.
High-growth "momentum" stocks were among the strongest issues of the day, with TripAdvisor gaining 5.2 percent and Netflix rising 4.2 percent. Vertex Pharmaceuticals gained 3.4 percent.
Internet and biotechnology names have been among the most volatile in recent weeks, advancing on signs of economic improvement and slumping on concerns that their valuations are too hefty. The small-capitalization Russell 2000 index rose 1 percent after three straight declines. The index has several times approached correction territory, a decline of 10 percent from a recent high, only to bounce back slightly.
"I don't know what to make of the gain in growth stocks, other than the fact that they've been beaten up to the point of being oversold, which is attracting short-term traders and some short covering," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "Nothing has changed to make them a screaming buy, and we're still not interested in them."
The defensive posture of investors has been reflected by a sector rotation into groups such as utilities, telecommunications and energy, which have outperformed the broader S.&P. 500 over the last three months.
Campbell Soup fell 1.1 percent after the world's largest soup maker posted weaker-than-expected quarterly sales and cut its full-year sales guidance.
Earnings season will effectively draw to a close this week, with 23 companies scheduled to report, including the retailers Home Depot and Lowe's.
Of the 464 companies in the S.&P. 500 that have reported earnings through Friday, 69.2 percent beat expectations, above the long-term average of 63 percent and the 66 percent average over the last four quarters.
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