Chrysler deal lifts Dow
Blue-chip stocks rose Monday as news that DaimlerChrysler had found a buyer for its beleaguered Chrysler unit boosted automotive shares, but the broader market fell amid renewed concerns about the economy’s health.
Private equity firm Cerberus Capital Management agreed to buy 80% of Chrysler Group from its German parent company for $7.4 billion. Bear Stearns said the Chrysler sale was good news for General Motors and Ford Motor and raised its rating on GM stock, which gained almost 4%.
But the boost among auto stocks, which briefly pushed the Dow Jones industrial average to a new trading high, was offset by declines in other sectors after a survey by a Federal Reserve bank indicated that forecasters had cut estimates for U.S. economic growth in the second quarter
Also keeping a lid on share prices was wariness about today’s release of the government’s consumer price index.
“People are waiting to get a better read on some of the pricing data,” said Jack Caffrey, equity strategist at J.P. Morgan Private Bank. “It does seem like there’s a bit of a holding pattern.”
The Dow Jones industrial average climbed 20.56 points, or 0.2%, to end at 13,346.78. The Standard & Poor’s 500 index slipped 2.70 points, or 0.2%, to 1,503.15. The Nasdaq composite index was down 15.78 points, or 0.6%, at 2,546.44.
The Russell 2,000 index of smaller-company stocks fell 7.21 points, or 0.9%, to 822.33.
Declining stocks outnumbered advancing issues by about 7 to 4 on the New York Stock Exchange.
Bond yields advanced. The yield on the benchmark 10-year Treasury note rose to 4.70% from 4.67% late Friday.
The dollar was mixed against other major currencies, while gold prices fell.
Crude oil climbed 9 cents to $62.46 a barrel on the New York Mercantile Exchange. U.S. retail gasoline prices rose to fresh records, according to two surveys.
In the auto sector, DaimlerChrysler rose $2.12, or 2.6%, to $84.12. GM, one of the 30 Dow components, climbed $1.16, or 3.9%, to $30.62. Ford gained 34 cents, or 4.1%, to $8.71.
In the buyout of Chrysler by Cerberus, “The market sees a sophisticated investment group that is finding value in the auto group,” said Jerome Dodson, president of Parnassus Investments in San Francisco.
As a result, he said, investors are asking whether “GM and Ford are worth more than their stock price indicates.”
In other market highlights:
* Citigroup and Merrill Lynch fell as financial stocks contributed the most to the S&P; 500’s decline, dropping 0.6% as a group. Citigroup fell 25 cents to $52.86. Merrill Lynch slid $1.14, or 1.2%, to $92.37.
* Shares of Amgen sank in late trading after the U.S. Supreme Court said it would not hear an appeal by the drug maker in a long-standing patent battle with rivals over the sale of an anemia treatment. Amgen fell 23 cents to $56.07 in regular trading, then tumbled to $54.10 in the after-hours market.
* Mylan Laboratories agreed to buy Merck of Germany’s generic-drug unit for $6.7 billion in cash to become the world’s third-largest maker of copycat versions of drugs. Mylan shares tumbled $2.70, or 12%, to $19.70 for the sharpest decline in the S&P; 500.
* Cardinal Health, the second-largest U.S. drug distributor, agreed to acquire Viasys Healthcare Inc. for $1.45 billion to add respiratory-care products used in hospitals and expand global sales. Viasys soared $11.63, or 37%, to $43.18. Cardinal Health rose 12 cents to $69.19.
* Primedia surged 33 cents, or 13%, to $2.82. The media company agreed to sell about 70 magazines, including Motor Trend, Hot Rod and Surfer, to Source Interlink, a company controlled by billionaire investor Ron Burkle, for $1.2 billion in cash. Source Interlink tumbled $1.01, or 15%, to $5.79.
* Advanced Micro Devices rose 68 cents, or 4.6%, to $15.36. The world’s second-largest maker of computer microprocessors began selling new graphics chips and announced plans to challenge Intel with a redesigned desktop processor. Intel fell 16 cents to $22.12.
* Applied Materials rose for a second day, gaining 71 cents, or 3.6%, to $20.48. The biggest maker of semiconductor equipment reports earnings today after the close of U.S. exchanges.
* Dell fell 54 cents, or 2.1%, to $25.27 after a Standard & Poor’s analyst downgraded the stock to “hold” from “buy.”
* The U.S.-traded shares of Nokia added 89 cents, or 3.6%, to $25.96. The world’s largest maker of mobile phones boosted its second-quarter market-share forecast, thanks to the clearance of excess inventory.
* Among new stock offerings, Foothill Ranch-based nursing-home owner Skilled Healthcare Group sold 16.7 million shares at $15.50 each, in the middle of the range of $14 to $16 the company hoped to get. The stock will begin trading today on the NYSE under the symbol SKH.
* Overseas, Japan’s Nikkei stock average rose 0.7%. Britain’s FTSE 100 lost 0.2%, Germany’s DAX dropped 0.3% and France’s CAC-40 slid 0.4%.
