Stocks mixed on merger news
Wall Street was mixed in an erratic session Monday after a flurry of merger news failed to erase investors’ concerns that a recent run-up had left stocks overbought.
Monday’s merger agreements, including a deal by Freeport-McMoRan Copper & Gold to acquire Phelps Dodge for $26 billion, totaled more than $50 billion in activity. Though the deals indicate that the companies are optimistic about the future, investors appear unconvinced about the health of the economy and were more cautious than usual given the spate of merger announcements. The buyout news battled with a sense that stocks were due for a pullback after the major indexes rose more than 1% last week.
Matthew Smith, vice president and portfolio manager at Smith Affiliated Capital, contends that investors could be wary of sending stocks much higher and in many cases will simply try to hold their gains until the end of the year.
“I just don’t think right now it’s warranted to take more risk on, given the moves we’ve had. We might see trending sideways,” he said.
The Dow Jones industrial average was down 26.02 points, or 0.2%, at 12,316.54. Earlier in the session the Dow hit another trading high of 12,355.23.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index closed down 0.7 of a point, or 0.1%, to 1,400.50, and the technology-heavy Nasdaq composite index rose 6.86 points, or 0.3%, to 2,452.72.
U.S. Treasuries were mostly flat Monday as a lack of economic data drove investors to the sidelines. The yield on the benchmark 10-year U.S. Treasury note was unchanged at 4.60%.
Crude oil futures fell 17 cents to $58.80 a barrel on the New York Mercantile Exchange.
An overall drop in oil prices has helped lift investor sentiment about the ability of the economy to pull off a soft landing. That notion helped the Dow achieve four straight record closes last week and helped push the S&P; 500 to close at a six-year high Friday.
Readings last week showed that a drop in oil prices in October helped hold back inflation. If inflation can be neutralized, the Federal Reserve would be more likely to lower short-term interest rates eventually.
The central bank has left rates unchanged at its last three meetings after a string of 17 straight advances.
Investors appeared unmoved by a report from the National Assn. of Realtors that showed that sales of existing homes fell 12.7% to a seasonally adjusted annual rate of 6.27 million units in the third quarter. The same period a year earlier saw the second-highest level ever recorded.
In other market highlights:
* Freeport-McMoRan fell $1.77 to $55.63 after saying it would acquire copper miner Phelps Dodge for $25.9 billion in cash and stock. Phelps Dodge jumped $25.45, or 26.8%, to $120.47.
* Adding to recently announced private equity deals, Blackstone Group said it would pay $20 billion for real estate investment trust Equity Office Properties Trust. Equity Office Properties rose $3.42, or 7.7%, to $48.14.
* Lowe’s, the country’s No. 2 home improvement chain behind Home Depot, rose 10 cents to $30.58, after reporting a 10.8% increase in its third-quarter profit and despite lowering its fourth-quarter forecast. Home Depot rose 13 cents to $38.41.
* The London Stock Exchange rejected a second takeover bid from the Nasdaq Stock Market as too low. Nasdaq offered $5.1 billion for the 70% stake in the exchange it didn’t already own. Nasdaq rose $1.14, or 3.1%, to $37.71.
* Among home builders, D.R. Horton dropped 44 cents to $24.66, while Ryland retreated 75 cents to $47.74.
* A measure of oil-related companies declined 0.4% for the worst performance among 10 industry groups in the S&P; 500. The shares make up 9.6% of the benchmark index. Exxon Mobil slid 65 cents to $72.43. Valero Energy dropped $1.12 to $51.74.
