Summary: The Dow reaches new heights on Time Warner's rebuff of Twenty-First Century Fox; Yum benefits from KFC China rebound; PayPal gives eBay results a bounce; Bank of America reaches mortgage deal with AIG; Take 2 at Congress for Fed Chair Janet Yellen. Lily Jamali reports.
Stocks rebounding a day after the Fed's written report called valuations on smaller social media and biotech companies "substantially stretched". Those sectors still struggled but bigger companies led the Dow back to a record with market gains spread across the board. Investors, excited over potential dealmaking. Time Warner has been approached by Rupert Murdoch's Twenty-First Century Fox to form a new media conglomerate. In a video to employees, Time Warner CEO Jeff Bewkes says the board has considered and rejected the $80 billion offer. SOUNDBITE: JEFF BEWKES, CEO, TIME WARNER (ENGLISH) SAYING: "The board concluded that continuing to execute our strategic plan and our business plans will create significantly more value for the company and our shareholders and that that's superior to any proposal that Fox is in a position to offer." Time Warner shares surged to their highest level since 2001. Twenty-First Century Fox ended the day lower. Earnings were the other story of the day. Profits at Bank of America plunged 43 percent - blame that on a $650 million settlement with AIG over mortgage securities from the financial crisis. By the way, Negotiations on the same topic continue with Department of Justice. Shares ended the day down since results worse than anticipated. After the bell: earnings put out by Ebay edged past expectations. The company showed a 13% revenue gain. At YUM brands, worldwide sales grew 6% with 15% same-store sales growth in China, its biggest market. The U.S. economy pulled further ahead in recent weeks, according to the Federal Reserve's summary of economic conditions known as the Beige Book. In her second day of testimony before Congress, Fed Chair Janet Yellen said as much and said rising asset prices are not yet a threat to financial stability. SOUNDBITE: JANET YELLEN, FEDERAL RESERVE CHAIR (ENGLISH) SAYING: "Some things may be on the high side and there may be some pockets where we see valuations becoming very stretch but not generally. Use of leverage is not broad-based, it hasn't increased and credit growth is not at alarming levels by any means." Something that is rising - inflation. Producer prices in June rose 0.4 percent - double expectations. And crude oil was back above $101 a barrel after a big drop in U.S. supplies last week. European markets ended the day sharply higher.