Stocks climb on merger news
Wall Street rose broadly but modestly Tuesday, boosted by another spate of merger and acquisition deals as well as by better-than-expected earnings from Wal-Mart Stores.
The Dow Jones industrial average gained 19.07 points, or 0.2%, to a record 12,786.64 after recovering from a morning slide.
The rally set another milestone in the recovery from the 2000-to-2002 bear market: The Dow Jones Wilshire 5,000 index, the broadest U.S. stock index, closed at a record high -- finally surpassing its peak reached in March 2000.
The Wilshire index rose 62.89 points, or 0.4%, to 14,796.54, topping the high of 14,751.64 set March 24, 2000.
By contrast, the blue-chip Standard & Poor’s 500 index, which gained 4.14 points, or 0.3%, to 1,459.68 on Tuesday, still is 4.4% below its March 2000 record of 1,527.46.
The technology-heavy Nasdaq composite, which rose 16.73 points, or 0.7%, to 2,513.04, is 50% below its March 2000 all-time high of 5,048.62.
Home Depot, the world’s largest home improvement retailer, said sales at stores open more than a year dropped in the fourth quarter, suggesting that consumers’ appetite for home improvement goods is still dwindling because of the sluggish housing market.
The company’s results sent the market down early. But comments from outgoing Federal Reserve Gov. Susan Bies, who said slumping demand for housing might have bottomed out, alleviated some concern about the downturn dragging down the rest of the economy. Her remarks echoed those of Fed Chairman Ben S. Bernanke, who last week predicted the economy would keep growing at a modest pace.
“The overall trend of the market is basically positive,” said Brian Gendreau, investment strategist for ING Investment Management, pointing to Bernanke’s recent forecast of moderating growth and cooling inflation. “That’s a great environment for equities. Unless you have some specifically nasty news, there’s no reason why the trend shouldn’t be upward.”
Falling oil prices, which tumbled $1.32 to $58.07 a barrel in New York trading on forecasts of warmer weather, also lent some support to stocks, as did a proposed merger between XM Satellite Radio Holdings and Sirius Satellite Radio.
Bond yields fell slightly, with the yield on the benchmark 10-year Treasury note at 4.68%, down from 4.69% on Friday. U.S. financial markets were closed Monday for Presidents Day.
The dollar rose against most other major currencies, while gold futures fell $11.70 an ounce to $657.10.
The decline in crude prices gave some investors reason to buy back into the market as lower fuel costs curb consumer prices -- which could help boost discretionary spending.
Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh, noted that a drop in energy prices often pushed up stocks, but she also said that the link between the two markets had become tenuous. A decrease in energy prices typically pushes down oil company stocks.
On Tuesday, ConocoPhillips fell 57 cents to $65.58, Chevron dropped 69 cents to $70.12 and Exxon Mobil slid 42 cents to $74.87.
Home Depot’s weaker-than-anticipated sales also kept some pressure on stocks.
“We’re always fascinated with the consumer, so we’re taking their temperature constantly,” Caughey said.
Home Depot fell 10 cents to $41.34 after reporting same-store sales that disappointed analysts. But Wal-Mart rose $1.78, or 3.7%, to $50.26 after issuing its financial results, which showed better-than-expected fourth-quarter profit growth and an upbeat forecast for 2007.
Excitement over the proposed merger between XM Satellite and Sirius Satellite gave some stocks a boost, especially in the technology sector. But the effect on the overall market was somewhat muted as investors looked more closely at the deal, trying to gauge whether XM shareholder’s stock was getting a high enough premium and whether the deal would actually happen, given the regulatory obstacles the companies must overcome.
XM Satellite rose $1.43, or 10.2%, to $15.41, and Sirius Satellite rose 22 cents, or 6%, to $3.92.
In addition to the XM-Sirius deal, British pharmaceutical company Shire is buying U.S. drug maker New River Pharmaceuticals for about $2.6 billion, Vulcan Materials is acquiring construction aggregate maker Florida Rock Industries for $4.6 billion and EMI Group said it was approached by Warner Music Group about a potential takeover.
Florida Rock Industries soared $19.58, or 42%, to $66.54.
New River surged $4.84, or 8.3%, to $63.19.
Warner Music climbed 90 cents, or 4.9%, to $19.15.
Not all takeover talk was positive for stocks, though. General Motors slipped 39 cents to $35.95 as rumors continued to circulate that the automaker was interested in buying Chrysler Group.
