Big Telecom Deal Fails to Give Stocks a Boost

Verizon Communications’ $6.8-billion bid for MCI was met with indifference Monday on Wall Street, where stocks barely budged in very light trading.

Mergers generally provide the markets with a boost, but with the telecom sector facing stiffer competition, investors saw the Verizon-MCI deal only as a necessary step in dealing with those competitive pressures. Most investors kept to the sidelines while the sector’s consolidation sorts itself out.

“It’s the kind of day where you catch your breath, digest the move up we’ve had over the last couple weeks,” said Jay Suskind, head trader for Ryan Beck & Co. “There aren’t a lot of catalysts out there that can really move the market.”

The Dow Jones industrial average fell 4.88 points, or 0.05%, to 10,791.13.

Broader stock indicators closed narrowly higher. The Standard & Poor’s 500 index was up 0.84 point, or less than 0.1%, at 1,206.14, and the Nasdaq composite index gained 6.25 points, or 0.3%, to 2,082.91.

With no premium on MCI’s shares -- they were valued in the Verizon deal at $20.75 -- the usual buying that goes along with such an announcement was conspicuously absent.

MCI shed 82 cents to $19.93, while Verizon slipped 12 cents to $36.19. Qwest Communications International, which also was interested in MCI, lost 17 cents to $3.98.

Although the implications for the telecom sector probably will be profound, Wall Street lacked enthusiasm because the merger talks had been in the news for some time. Also, investors’ attention has been focused on the economy rather than individual sectors.

“I think the merger really was built in to both MCI and Verizon’s stock prices already,” said Neil Massa, equity trader at John Hancock Funds in Boston. “Investors are looking forward now to later in the week, when you have retail sales reports coming out and [Federal Reserve Chairman Alan] Greenspan before Congress.”

The government’s retail sales report for January is due today. Greenspan will be testifying on Capitol Hill about the state of the economy and monetary policy Wednesday and Thursday. The Fed chairman is not expected to signal any change in the central bank’s policy of measured quarter-percentage-point interest rate increases.

Concern over interest rates and the possibility of inflation were a major cause of January’s downturn, though those worries were assuaged this month as the Fed stuck to its measured pace of rate increases and did not mention a greater inflation risk in its policy statement.

In other market highlights:

* U.S. Treasuries were narrowly mixed on a lack of market-moving economic data. Yields on the benchmark 10-year note fell to 4.07% from 4.08% on Friday. Yields on the two-year note rose to 3.35% from 3.32%.

* Oil rose 28 cents to $47.44 a barrel in New York trading. Energy analyst Simon Wardell of Global Insight said prices were in a holding pattern as the winter period drew to a close.

* American International Group pulled the Dow lower, losing $1.63 to $71.49, after saying it has received new subpoenas from the Securities and Exchange Commission and New York Atty. Gen. Eliot Spitzer regarding various products and transactions.

* OfficeMax dropped $1.73 to $30.02 after the company’s president and chief executive stepped down. The company also fired six employees over accounting irregularities.

* Apple climbed $3.42 to $84.63. The maker of the iPod music player is expected to earn 45 cents a share in the second quarter, boosted by sales of software, PowerBook and Mac Mini computers and the iPod Shuffle music player, UBS analyst Benjamin Reitzes wrote. Reitzes raised his 12-month price target for Apple shares to $99 from $85.

* An index of energy stocks rose 0.5%, for the second-biggest gain among 10 industry groups in the S&P; 500. Exxon added 72 cents to $56.83, and ConocoPhillips rose $1.93 to $100.97.

* Hewlett-Packard, which ousted Carly Fiorina as its CEO last week, dropped 53 cents to $20.77. The company may not soon unload its personal computer operations, Barron’s reported, citing comments from Chairwoman Patricia C. Dunn.

* KLA-Tencor fell 18 cents to $49.73. The company said after the market closed that it would begin paying a quarterly dividend and planned to buy back as many as 10 million shares of its common stock. The San Jose company, which makes equipment for inspecting semiconductors, said it would pay a dividend of 12 cents a share June 1 to holders of record as of May 2.

* Coca-Cola Enterprises retreated 56 cents to $22.55. The world’s largest soft drink distributor was reduced to “underperform” from “market perform” by Sanford C. Bernstein & Co. analyst Robert Van Brugge.