Stocks stay on recovery course
Stocks managed a moderate advance Thursday, staying afloat as signs of strength in corporate takeover activity helped investors stomach a sharp rise in wholesale inflation.
Wall Street still displayed nervousness, however, selling off briefly after former Federal Reserve Chairman Alan Greenspan rekindled investors’ fears about sub-prime mortgages.
The knee-jerk dip was illustrative of how jittery the markets are now, recoiling when reminded that no one yet knows the extent to which weak areas of the economy, notably the struggling housing market and hemorrhaging sub-prime lenders, will hurt growth this year.
Trading was erratic at other points in the session, but overall investors Thursday chose to pick up bargains after a 242-point drop in the Dow Jones industrials on Tuesday and a 57-point recovery Wednesday that suggested the market wanted to hold above the index’s 12,000 mark, at least for now.
The Dow rose 26.28 points, or 0.2%, to 12,159.68. It is 627 points below its closing high of 12,786.64 reached Feb. 20.
“There’s some optimism because the market had fallen quite a bit and it showed resilience [Wednesday], which is encouraging,” said Ed Peters, chief investment officer at PanAgora Asset Management in Boston, adding that the sentiment could shift on the consumer price index’s release today. “Some days the pessimists win, some days the optimists win.”
A bidding battle for commodities exchange CBOT Holdings also gave stocks a lift. Despite the cooling economy, merger activity has been surging, providing support for share prices.
Broader stock indicators were higher. The Standard & Poor’s 500 index gained 5.11 points, or 0.4%, to 1,392.28, and the Nasdaq composite advanced 6.96 points, or 0.3%, to 2,378.70.
Winners topped losers by more than 2 to 1 on the New York Stock Exchange.
Oil prices fell 61 cents to $57.55 a barrel on the New York Mercantile Exchange after the Organization of the Petroleum Exporting Countries decided to keep output steady, as expected.
Bonds were little changed. The yield on the benchmark 10-year Treasury note was flat at 4.54%, despite the government’s report that wholesale prices surged 1.3% in February.
Inflation concerns may have been offset by weak regional manufacturing-activity reports from the New York and Philadelphia Fed banks.
The dollar was mixed against other major currencies.
Stocks briefly retreated after Greenspan said at a conference in Boca Raton, Fla., that mortgage lenders’ troubles were not yet spilling into the broader economy but could if home prices saw another big decline.
Some analysts have raised the possibility that the Fed would begin cutting interest rates if economic weakness persists. But “people should be thinking that the odds of the Fed cutting rates are pretty slim this year,” Peters said.
The Fed meets next week to decide whether to adjust short-term interest rates. It is expected to keep rates on hold.
Among the day’s market highlights:
* Stocks got a boost from Intercontinental Exchange’s unsolicited $9.9-billion, all-stock bid for CBOT Holdings. ICE’s bid followed an already agreed-upon $8-billion takeover of CBOT by Chicago Mercantile Exchange Holdings.
CBOT soared $28.86 to $194.95, ICE fell $3.83 to $128.10 and CME sank $31.09 to $532.88.
* General Electric’s Capital Solutions business and Blackstone Group agreed to buy PHH for $1.7 billion. PHH provides mortgage and vehicle fleet management services.
PHH surged $3.29 to $31.10. GE added 21 cents to $34.52.
* The PHH deal raised hopes that shares of beaten-down mortgage lenders might attract offers.
Accredited Home Lenders soared $3.39 to $9.43; NovaStar Financial jumped 97 cents to $5.15; and Countrywide Financial gained $1.08 to $35.47.
* In other takeover news, Cisco Systems agreed to acquire Web-conferencing company WebEx for about $3.2 billion in cash. WebEx rocketed $10.18 to $56.38; Cisco fell 4 cents to $25.81.