Acquisitions Help Stocks Post Gains in Session
Wall Street overcame its recent caution Wednesday, with a raft of acquisitions propping up stocks and lower-than-expected gross domestic product growth easing inflation fears.
Acquisitions in the technology and pharmaceutical industries promised to reinvigorate those lagging sectors. Google, Seagate Technologies and IBM all announced major purchases, while Allergan said it would buy Inamed.
Despite the good news, stocks still saw a downturn in afternoon trading, giving up more substantial gains from earlier in the session. Although stocks are not expected to give up the year’s modest gains, a further substantial push higher is in doubt.
“We’re definitely picking up some momentum going into year’s end, but that’s not really translating into any sense of urgency,” said Hugh Johnson, chairman at Johnson Illington Advisors. The Dow Jones industrial average rose 28.18 points, or 0.3%, to 10,833.73. The Dow had been more than 94 points higher earlier in the session.
Broader stock indicators also moved higher. The Standard & Poor’s 500 index climbed 3.17 points, or 0.3%, to 1,262.79, while the Nasdaq composite index added 9.24 points, or 0.4%, to 2,231.66.
The Commerce Department said the economy grew at a revised 4.1% annual pace last quarter, compared with the 4.3% rate reported last month.
Even as growth was lower than forecast, the price index for personal consumption expenditures, excluding food and energy, was revised to 1.4%, up from 1.2%.
The personal consumption numbers helped push yields on 10-year U.S. Treasury notes to 4.49%, from 4.46% on Tuesday. Signs of faster inflation may encourage central bank policymakers to keep raising their interest rate target through March.
Crude oil futures rose after the government’s weekly petroleum report showed a decline in domestic inventories of distillate fuel, which include heating oil and diesel. Crude for February delivery rose 47 cents to $58.56 a barrel in New York trading.
With just six trading days before 2006, the year probably will end with modest gains, as opposed to 2004’s strong year-end rally. That, however, could make early 2006 a little better.
“We sold off pretty heavily in January coming off last year’s rally, and I don’t think we’ll see as much of that in 2006,” said Joseph Battipaglia, chief investment officer at Ryan Beck.
In other market highlights:
* Google fell $3.41 to $426.33, a day after winning the bidding war for a piece of Time Warner’s America Online division, paying $1 billion for a 5% stake. Time Warner lost 16 cents to $17.58, while Microsoft, which had hoped to win the stake, slipped 13 cents to $26.73.
* Computer hard-drive maker Seagate said it would pay $1.9 billion in stock for rival Maxtor, hoping the combined company would be able to cut costs and gain market share. Seagate climbed 63 cents to $20.23, while Maxtor soared $2.41 to $6.93. Maxtor competitor Western Digital jumped $2.89 to $18.45 on speculation that it too may be bought.
* Dow component IBM added 64 cents to $83.12 after announcing the purchase of Micromuse, which makes software to manage video and voice traffic on computer networks. Micromuse surged $2.71 to $9.92.
* Inamed climbed $1.26 to $87.02. Allergan, best known for its Botox skin treatment, said late Tuesday that it would buy Inamed in a cash and stock deal valued at $3.42 billion. Allergan gained 71 cents to $107.31.
* FedEx gained $5.21 to $103.70 after saying net income for its second quarter ended Nov. 30 was $1.53 a share, exceeding its Sept. 21 forecast of $1.30 to $1.45 a share. The Dow Jones transportation average jumped 2.3%, and United Parcel Service added $1.39 to $76.62.
* Nike tumbled $2.73 to $85.75 after posting a 15% increase in quarterly profit but warned that future orders were lagging.
