NEW YORK (AP) – Wall Street bounced back Wednesday from its sharp decline a day earlier, boosted by takeover activity ahead of second-quarter earnings reports.
Investors shaken by profit warnings earlier in the week appeared to be cautiously optimistic as they awaited quarterly earnings reports.
Meanwhile, new merger and acquisition activity encouraged buying. Steelmaker Gerdau Ameristeel Corp. said late Tuesday it was buying Chaparral Steel Co. for $4.22 billion, while speculation mounted Wednesday that Colgate-Palmolive Co. was eying all or part of Unilever.
Giving the stock market an extra lift, Fed officials alleviated some jitters about problems involving subprime lending. Philadelphia Federal Reserve President Charles Plosser said the financial system is well-equipped to handle home loan risks, and Fed Governor Kevin Warsh said that while subprime exposure troubles may not be over, they are not spilling into the broader economy.
Market watchers found it auspicious that Wall Street managed to recover some ground from its tumble Tuesday, when the Dow Jones industrial average lost 148 points, but said investors may not be out of the woods yet.
“There’s still, I sense, some caution, and I think the principal reason for the caution is that we have the heart of the earnings season ahead of us,” said Hugh Johnson, chairman of Johnson Illington Advisors.
“No one wants to make a major commitment to the market until we see the earnings reports. Earnings reports are a big hurdle that’s on the horizon.”
According to preliminary calculations, the Dow rose 76.17, or 0.56 percent, to 13,577.87.
The Standard & Poor’s 500 index rose 8.64, or 0.57 percent, to 1,518.76, while the Nasdaq composite index rose 12.63, or 0.48 percent, to 2,651.79.
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