Wall Street Surges on Biotech Stocks

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Wall Street Surges on Biotech Stocks

US stocks rallied along with global stocks buoyed by a continued flurry of deal announcements in healthcare and dovish remarks by China on further monetary policy easing.

All the major indexes rebounded off a sharp decline in the previous session with the Dow Jones advancing by double figures.

The Dow Jones Industrial Average surged 242 points or 1.4% in early morning trading to 17,955 points buoyed by a gain in its healthcare component.

Shares of UnitedHealth Group advanced 3.8%, the most among the entire index’s components on news that the group was going to acquire pharmacy benefits manager Catamaran Corp for more than $12.8 billion.

Catamaran vaulted more than 24% gaining $11.57 to $60.07.

The benchmark S&P 500 Index edged up 18 points or 0.9% in morning trading to 2079 points. It is now 1.1% up in the first quarter to maintain its longest streak of quarterly advances since 1998.

The Nasdaq Composite added 49.60 points or 1.01% to 4940.85.

The Nasdaq biotech index benefited from the three major healthcare deals announced today to advance 0.9%. This marked a partial rebound from its 5.2% decline last week with the index now 5.6% below its record close achieved earlier in the month.

“On the surface, it would appear that biotech is expensive, but if insiders are acquiring, that should give more confidence to broad-market investors,” Jack Ablin, chief investment officer at BMO Private Bank in Chicago, told Reuters.

The market strength was attributed to continued optimism that central banks around the world would continue to support economic growth.

The Federal Reserve Chairwoman Janet Yellen announced Friday that the bank would probably raise the lending rates later this year with subsequent raises occurring gradually.

The Chinese central bank, on the other hand, announced that the world’s second largest economy would continue to support economic growth if inflation continued to weaken.

“Stocks are being driven in the short-term by the potential for Chinese quantitative easing that they hinted at over the weekend, as well as the mergers and buyouts happening in the equity market,” Andrew Brenner, the head of international fixed income for National Alliance Capital Markets, told Bloomberg by phone.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com