Key indexes rise; stocks end mixed
Major stock indexes rebounded Monday after a fresh round of buyout news offered evidence that Wall Street still had an appetite for deal making. But most stocks ended lower.
Better-than-expected profit news from Merck also improved the mood on Wall Street, helping the stock market partially recover from a steep sell-off Friday that was triggered by some weak earnings reports and worries about souring sub-prime loans.
Leading the latest takeover wave was Transocean, the world’s largest offshore drilling contractor, which agreed to acquire rival GlobalSantaFe Corp. for $17 billion.
In other deal news, equipment rental company United Rentals agreed to a $4-billion buyout by private equity firm Cerberus Capital Management, and Barclays said it would raise its offer for Netherlands-based ABN Amro Holding to $93.2 billion to fend off a rival bid.
The Dow Jones industrials jumped 92.34 points, or 0.7%, to 13,943.42. The Standard & Poor’s 500 index rose 7.47 points, or 0.5%, to 1,541.57. The Nasdaq composite index gained 2.98 points, or 0.1%, to 2,690.58. The Russell 2,000 index fell 0.82 of a point, or 0.1%, to 835.62.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange.
The yield on the benchmark 10-year Treasury note finished at 4.95%, unchanged from late Friday.
The dollar was mixed against other major currencies after touching another record low against the euro and a new 26-year low against the British pound. Gold prices fell.
Oil futures sank 90 cents to $74.89 a barrel on the New York Mercantile Exchange on suggestions that the Organization of the Petroleum Exporting Countries might increase its output.
On the takeover front, Wall Street applauded the Transocean-GlobalSantaFe deal because it reflected the ability of energy companies to spend more to extract oil, the price of which touched nearly a one-year high last week. Under the deal, shareholders of both Houston-based companies would receive cash and stock in the combined company, which would have an estimated value of $53 billion, including debt.
Transocean shares climbed $5.99, or 5.4%, to $115.96, while GlobalSantaFe rose $3.59, or 4.8%, to $78.33.
Other oil services companies rose. Noble rose $3.82, or 3.7%, to a record $106.28. Diamond Offshore Drilling jumped $4.64, or 4.3%, to an all-time high of $113.04.
The price being paid for United Rentals, $34.50 a share, was 7% more than the stock’s closing price Friday and 25% greater than its close April 10, the day the company said it was exploring strategic options. On Monday, United Rentals rose 61 cents, or 1.9%, to $32.98.
Among other deals announced Monday were two in the medical device industry.
Teleflex, a maker of surgical instruments, car parts and boat engines, agreed to buy medical-device maker Arrow International, which makes products for critical and cardiac care, for $2 billion, or $45.50 a share. Arrow soared $6.32, or 17%, to $44.11.
Ev3 agreed to buy FoxHollow Technologies, a maker of devices to repair blocked arteries, for $25.92, or $780 million, in cash and stock. FoxHollow jumped $2.73, or 11%, to $27.45. Ev3 climbed $1.64, or 10%, to $17.62.
In other takeover activity, Opsware surged $3.72, or 36%, to $14. Hewlett-Packard agreed to buy the maker of data center software for $14.25 a share, or about $1.6 billion.
Telecom gear maker Tellabs rose 35 cents, or 3%, to $12.20 on a report that Nokia Siemens Networks might offer $16 to $17 a share, or about $7 billion, for the company. Nokia Siemens declined to comment.
While the deal news helped convince Wall Street that stocks had more room to run, earnings also played a role.
Merck posted a 12% rise in second-quarter earnings. The pharmaceutical giant’s stock rose $3.31, or 6.8%, to $52.33.
Oil services giant Halliburton also beat profit expectations. Its shares rose $1.17, or 3.2%, to $37.74.
However, American Express, which rose 15 cents to $64.66 on better-than-expected profit, slipped $1.38 in after-hours trading on concerns about the firm’s revenue outlook.
AT&T; rose 97 cents, or 2.5%, to $40.03, helping to lift an index of telecom stocks 1.6%, the steepest gain among 10 industry groups. Analysts expect the firm to post higher second-quarter earnings today because of its contract to sell Apple’s iPhone.
In other market highlights:
* An index of home builder stocks sank 3.4% after Deutsche Bank said demand for new homes fell further as potential buyers had trouble getting mortgages. D.R. Horton fell 79 cents to $18.38. Westwood-based KB Home dropped $1.48 to $33.55.
Real estate investment trust shares also tumbled. A Bloomberg index of 127 REIT issues slid 1.6% to an 11-month low.
* Netflix sank $2.36 to $17.27 after the company reduced the price on two of its most popular DVD rental plans by $1 a month.
* Cumulus Media soared $2.75 to $11.12. The operator of radio stations agreed to a $507.7-million cash buyout by a group of investors that includes its chief executive and an affiliate of Merrill Lynch Global Private Equity.
* Hasbro slid $1.76, or 5.4%, to $30.80. The toy maker’s profit fell to 3 cents a share from 7 cents a year earlier.
* Barr Pharmaceuticals rose $3.31, or 6.3%, to $55.52 on speculation that the drug maker would attract takeover offers.
* Overseas, key stock indexes rose 0.3% in Hong Kong, 3.8% in Shanghai, 0.6% in Britain, 0.9% in Germany and 0.9% in France.
