Optimism and Buyouts Keep Markets Humming

The second week of 2012 is keeping the year's hot streak alive, as all three major indices and gold closed up while oil eroded slightly.

It appears we're seeing some optimism ahead of earnings season, especially after Alcoa put out decent guidance yesterday. Meanwhile, Federal Reserve officials hinted that more action could be taken this year, likely purchasing mortgage backed securities, despite the increasing sense that a true recovery may be showing its face. And Toyota indicated it may use the United States increasingly as a place to build and export its vehicles. This decision is the result of a strong yen making Japanese-sourced vehicles increasingly less profitable, but with a stubbornly high unemployment rate hovering like a dark cloud over the domestic economy, an increase of manufacturing jobs in the U.S. is great news, especially if other companies join Toyota's lead.

With those stories in mind, it's no surprise that the three major indices all opened up and stayed up throughout the trading day. The Dow Jones Industrial Average (INDEX: ^DJI  ) added nearly 70 points, leaving it up 0.56%, and the S&P 500 (INDEX: ^GSPC  ) closed with a 0.89% gain, but both hit intraday highs not seen since summer. And the Nasdaq (INDEX: ^IXIC  ) was the best performer of the day, advancing a solid 0.97%.

The biggest individual gainers came mostly from the biotech space. Yesterday's dramatic announcement that Bristol-Myers Squibb committed to purchasing Inhibitex at $26 per share, a 160% premium, is still reverberating in the sector. Investors apparently see Achillion (Nasdaq: ACHN  ) and its three hep-C drug candidates as next in line to be scooped up, with shares adding a remarkable 22% in back-to-back sessions -- a feat topped only by compatriot hep-C drug developer Idenix Pharmaceuticals' (Nasdaq: IDIX  ) 37% gain yesterday and 24% gain today.

All told, it appears the market is continuing a positive trend to kick off the year. It is worth watching with a close eye to see how the market closes this week and this month. And hopefully if January ends up, past trends of its foreshadowing a strong annual performance will remain true.

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David Williamson holds no position in any company mentioned. Check out his holdings and a short bio. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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