Stocks end higher, led by financial shares; drugmakers drop

The Federal Reserve’s decision to delay an interest rate increase last week was largely a “risk management” exercise to be sure recent market volatility would not become a drag on the economy, Atlanta Fed President Dennis Lockhart said on Monday.

The Dow Jones industrial average rose 125.61 points, or 0.8 percent, to 16,510.19. Apple’s 1.1 percent rise gave the biggest boost to the S&P 500 and the Nasdaq.

Stocks were rebounding from sharp falls on Friday. Those declines were caused by fears that the Fed’s decision to keep interest rates at historic lows would make it hard for banks to charge their customers more to borrowers.

Shares of biotech companies fell after US Democratic presidential candidate Hillary Clinton said she would announce a plan to stop “price gouging” for speciality drugs. The two weakest Dow stocks were Merck (Other OTC: MKGAF – news), down 2.2 percent, and Pfizer (NYSE: PFE – news), down 1.3 percent. All 10 major S&P sectors were higher.

Semiconductor company Atmel surged 12.7 percent on news it agreed to be acquired by Britain’s Dialog Semiconductor (Xetra: 927200 – news) for $4.6 billion.

After the Fed left rates unchanged, the S&P 500 erased its weekly gain, with financial companies tumbling. The Nasdaq composite (INDEXNASDAQ:.IXIC) advanced 44.92 points, or 0.93 percent, to 4,872. Shares of Biogen fell 5.6 per cent, while Gilead Sciences lost 2.5 per cent. The Shanghai Composite Exchange gained 1.9 per cent to 3,156.54.

“Sales activity was down in many parts of the country last month – especially in the South and West – as the persistent summer theme of tight inventory levels likely deterred some buyers”, the chief economist for the National Association of Realtors, said in a statement. Tokyo was closed for a three-day holiday.

The pan-European FTSEurofirst 300 index and the euro zone’s blue-chip Euro STOXX 50 index were up 1.1 percent and 1.4 percent respectively.

Treasury prices retreated throughout the day even when stocks dropped off their highs; as a result, the 10-year note settled on its low with the yield rising 6 bps to 2.21%.