Stocks climbed Monday, driving the Dow Jones industrial average to a record close and the Nasdaq to its biggest points gain ever, as America Online's announcement that it is buying Time Warner led to gains in entertainment and technology issues.
"You have this blockbuster deal. It has implications through Internet, media, and entertainment," said Larry Wachtel, an analyst at Prudential Securities Inc.
Based on early and unofficial data, the Dow ended up 49.64 points, or 0.43 percent, at 11,572.20, its second successive record closing high. Among the main Dow gainers was entertainment giant Walt Disney (DIS), up 4 3/4 at 35 15/16.
Also lifting the Dow were technology companies such as No. 1 chipmaker Intel, which was up 3 3/4 at 85 3/4, and computer maker Hewlett-Packard (HWPK) up 6 5/8 at 111.
The technology-heavy Nasdaq index gained 167.04 points, or 4.30 percent, to 4,049.66, its biggest point gain ever. It was boosted by Internet media company Yahoo (YHOO), which was up 28 13/16 at 436 1/16.
Disney and Yahoo rose on expectations that top Internet service provider America Online's (AOL) record US$163 billion takeover of media giant Time Warner (TWX) throws the media, Internet, and phone industries wide open for other mega-mergers.
"If you look at the market today, everybody is in play," said Dennis McAlpine, an analyst with Ryan Beck & Co. "They are not taking any prisoners today."
AOL, which was volatile all day, ended down 1 7/8 at 71 while Time Warner rocketed 25 5/16 to 90 1/16.
The broader Standard & Poor's 500 index rose 16.12 points, or 1.12 percent, to 1,457.59.
Semiconductors, broadcasters, publishers, consumer staples, health care, biotechnology, and hotel shares were up while banks and insurance brokers fell amid concerns that interest rates are set to rise.
"Technology stocks got beaten up pretty bad last week," said Harvey Hirshhorn, Stein Roe and Farnham Chief Economist and Investment Strategist. "They started to firm up a little bit on Friday. The AOL-Time Warner deal has certainly helped a number of Internet and communications stocks."
The stock market's upswing came amid a drop of 18/32 in the US Treasury's 30-year bond with the yield rising to 6.59 percent from 6.54 percent on Friday.
Traders said bonds were weaker as money flowed to stocks and as the bond market fretted that the Federal Reserve may take a more hawkish stance on inflation by raising interest rates more than expected.
