Wall Street hits record, investors eye major chip deal

By Noel Randewich

(Reuters) - U.S. stocks rose to record highs on Monday after Broadcom made a monster bid for Qualcomm and investors bet that a Republican plan to cut corporate taxes would bolster earnings.

Qualcomm rose 2.33 percent after Broadcom offered to buy the smartphone chip supplier for $103 billion, in what could be the biggest ever acquisition in the tech sector. Broadcom dipped 0.7 percent.

"The fact that the deal is on the table is huge," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

"We have not seen much in the way of dealmaking this year. So this might jumpstart some of the dealmaking ahead of the tax policy changes."

 

Investor optimism was also fuelled by a Republican proposal last week to slash the corporate tax rate to 20 percent from 35 percent and end some tax breaks for companies and individuals.

"I think that has to be the main driver," said John Brady, managing director at R.J. O'Brien & Associates in Chicago. "Even if it only goes to 25 percent or 27 percent, it's still moving the right way."

Apple rose 1.23 percent and contributed more than any other stock to the benchmark S&P 500 index's gain.

Shares of Sprint slumped 10.11 percent to more-than-a-year low after the wireless provider and T-Mobile called off a planned merger. T-Mobile lost 6.2 percent.

All three major indexes were on track to close at record highs.

At 2:25 pm ET, the Dow Jones Industrial Average <.DJI> was up 0.1 percent at 23,563.4 points, while the S&P 500 <.SPX> had gained 0.15 percent to 2,591.83.

The Nasdaq Composite <.IXIC> added 0.3 percent to 6,784.76.

The S&P 500 energy index <.SPNY> surged 1.92 percent on gains in crude prices after the crown price of Saudi Arabia, the world's largest oil exporter, tightened his grip on power through an anti-corruption purge. [O/R]

U.S. companies continue to report their quarterly earnings. With more than 400 of S&P 500 companies having reported, earnings for the third quarter are expected to have climbed 8 percent, compared to an expectation of a 5.9 percent rise at the start of October, according to Thomson Reuters I/B/E/S.

Michael Kors jumped 15.07 percent after the fashion accessories maker raised its 2017 revenue forecast. The stock was the biggest percentage gainer on the S&P.

Advanced Micro Devices jumped 6.97 percent after a report that it plans to team up with Intel to form a personal computer chip unit. Intel was down marginally.

Advancing issues outnumbered declining ones on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.17-to-1 ratio favoured advancers.

(Additional reporting by Tanya Agrawal; Editing by Bernadette Baum)