Stocks gain on news of media firm bid; Dow hits fresh high
Wall Street’s stock rally resumed Tuesday after a bid for media company Dow Jones revived expectations for corporate takeovers.
The Dow Jones industrial average reached another record close, its 38th since October, as big-company stocks benefited from the turnaround.
Earlier in the session, stocks wavered on mixed economic data that showed strength in manufacturing but a wilting housing market and weak car sales. After April’s big advance, investors were wary that the current economy wouldn’t justify another move higher on Wall Street.
But the caution dissipated after Dow Jones, which publishes the Wall Street Journal, confirmed that it had received an unsolicited bid from Rupert Murdoch’s News Corp. to buy the company for $5 billion, or $60 a share.
“The market kind of just took off from there,” said Todd Leone, managing director of equity trading at Cowen. News of the bid boosted media companies and publishers in particular, but also encouraged buying in other sectors as it reaffirmed a trend of heavy takeover activity despite an economic slowdown.
“It’s money pouring into the market,” Leone said.
The Dow industrials rose 73.23, or 0.6%, to 13,136.14, the Standard & Poor’s 500 index rose 3.93 points, or 0.3%, to 1,486.30 and the Nasdaq composite index rose 6.44 points, or 0.3%, to 2,531.53.
The Russell 2000 index of smaller-company stocks rose 1.68 points, or 0.2%, to 816.25.
Bond yields rebounded after the report on manufacturing made lower interest rates look less likely. The yield on the benchmark 10-year Treasury note rose to 4.64% from 4.62% on Monday.
The dollar gained against the euro, which fell to $1.362 from $1.365 on Monday.
Crude oil prices fell $1.31 to $64.40 on the New York Mercantile Exchange.
After investors heard Dow Jones was a takeover target, the company’s stock surged $19.87, or 55%, to $56.20. News Corp., which owns the Fox broadcast network and many other media properties, fell $1.01, or 4.2%, to $22.99.
Other media stocks rose. New York Times advanced $1.18, or 5%, to $24.58, Journal Register jumped 42 cents, or 7.3%, to $6.29, and the U.S. shares of Reuters Group climbed $2.19, or 3.8%, to $59.43.
Adding to the takeover buzz was a report that Microsoft was considering buying online ad company 24/7 Real Media, whose shares rose $2.02, or 20%, to $11.97.
A stronger-than-expected reading on the Institute for Supply Management’s April manufacturing index failed to spark buying before the news about Dow Jones. Robust manufacturing activity is good for many U.S. companies, but it reduces the chance that the Federal Reserve will cut interest rates to boost spending -- especially amid rising costs, which the institute’s report described.
The National Assn. of Realtors said pending sales of existing homes fell 4.9% in March to their lowest level in four years, but investors also had little reaction to that report.
“Unless you’ve been living underneath a rock, you know residential real estate is hitting a soft patch,” said Arthur Hogan, chief market analyst at Jefferies & Co.
In other market highlights:
* Ford Motor, Toyota Motor and General Motors reported declines in U.S. sales for April. DaimlerChrysler reported a slim rise. Ford rose a penny to $8.05, DaimlerChrysler rose 40 cents to $80.91, Toyota’s U.S. shares rose 11 cents to $121.53 and GM rose 7 cents to $31.30.
* Procter & Gamble, one of the 30 Dow components and maker of Crest toothpaste and Pampers diapers, said its profit in the latest quarter rose 14%, but the figure failed to top expectations. The company’s shares fell $1.55, or 2.2%, to $62.96.
* Archer Daniels Midland fell short of analysts’ earnings forecasts. The country’s largest ethanol producer, the company cited higher corn costs. Its stock fell $2.10, or 5.4%, to $36.60.
* Liz Claiborne plunged $7.72, or 17%, to $37 after the maker of Juicy Couture and Lucky Brand clothing said first-quarter earnings plunged 65%.
* Advancing issues outnumbered decliners by 6 to 5 on the New York Stock Exchange.
* Overseas, Japan’s Nikkei stock average fell 0.7%. Britain’s FTSE 100 slipped 0.5%, Germany’s DAX rose 0.4% and France’s CAC-40 climbed 0.5%.
Bloomberg News was used in compiling this report.
