Stock rise on takeover deals
EmptyNEW YORK -- Stocks surged higher Friday as another round of corporate takeovers prodded investors to continue a largely uninterrupted months-long buying streak. The Dow Jones industrial average registered its 24th record close this year and the Standard & Poor's 500 index came within striking distance of its record high.
Beyond the buyout news, which has lent buoyancy to the markets for months, a stronger-than-expected reading on consumer sentiment helped investors set aside some concern that consumers unnerved by higher gas prices would pull back on spending and upend the economy's smooth slowdown.
The latest takeover news, including deals involving marquee names like General Electric Co. and Microsoft Corp., signaled that the enormous amount of liquidity that has lubricated global stock markets in recent months doesn't appear on the verge of evaporating.
"The M&A activity and earnings seem to be holding up better than expected. I think you're going to see more of this," said Bill Dwyer, chief investment officer at MTB Investment Advisors, referring to merger and acquisition deals as well as surprisingly strong profits.
The Dow rose 79.81, or 0.59%, to 13,556.53. The blue chips set a new trading high of 13,558.48, having crossed 13,500 for the first time on Thursday. The Dow has risen in 30 of the last 36 sessions.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 10.00, or 0.66%, to 1,522.75, its highest level in more than six years. The index came within fewer than 5 points of its record close of 1,527.46, set in March 2000.
The Nasdaq composite index rose 19.07, or 0.75%, to 2,558.45.
While the week saw a number of mixed finishes for the major indexes, investors seemed unfazed by the mostly modest pullbacks. Bigger consolidations aren't unusual given the string of gains seen in the last month in particular. For the week, the Dow rose 1.73%, its seventh straight week of gains. The recent weekly gains mark the longest streak of wins since an eight-week gain that ended in January 2004. The S&P 500 gained 1.12% and the Nasdaq lost 0.15%.
Bonds fell as the market apparently looked past China's announcement of an interest rate increase and a widening of the range at which the yuan can trade. A rising Chinese currency would make Chinese imports less competitive in the United States. The yield on the benchmark 10-year Treasury note rose to 4.81% from 4.76% late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose 8 cents to $64.94 per barrel on the New York Mercantile Exchange.
Investors appeared unfazed by rising oil prices, instead focusing on corporations' continued appetite for merger deals. The Wall Street Journal reported GE is near a deal to sell its plastics division to a Saudi Arabian industrial giant for about $11 billion. GE rose 43 cents to $36.96.
Microsoft struck an agreement to acquire online advertising company aQuantive Inc. for about $6 billion in cash, paying a premium following a rush of major online ad deals by its competitors in recent weeks. AQuantive soared $27.92, or 77.8%, to $63.79, while Microsoft slipped 15 cents to $30.83.
"I definitely think that the M&A activity is going to continue as long as rates are cheap. It's been really good bull run," said Caroline Lee, co-manager of the Laudus International MarketMasters fund. "It's a bit scary in the sense of how long this can continue but you have a lot of cautious forces out there as well," she said, referring to concerns about inflation and a weakening dollar that are perhaps conspiring to keep stocks from rising too quickly.
The buyout news came alongside favorable economic findings. The preliminary Reuters/University of Michigan index of consumer sentiment for May came in at 88.7. Wall Street had expected the reading would be unchanged from April at 87.1.
The mood of consumers remains important to the economy as consumer spending makes up two-thirds of U.S. economic activity. Perhaps giving investors further room for confidence, retailers J.C. Penney Co., Kohl's Corp. and Nordstrom Inc. on Thursday each posted earnings that topped Wall Street's expectations.
The reports came amid record gasoline prices -- which are averaging more than $3 per gallon nationwide. Higher gas prices could dent consumer spending, however, particularly at retailers such as Wal-Mart Stores Inc., whose primary customers are often sensitive to increases at the pump.
The recent rise in oil prices helped send shares of energy companies higher. ConocoPhillips rose $1.60, or 2.2%, to $74.85, while Exxon Mobil Corp. advanced $1.46 to $83.26.
In other corporate news Friday, Trump Entertainment Resorts Inc. rose $2.73, or 21%, to $15.80 after the casino and hotel operator said would-be suitors have shown interest in buying the company. Trump, which last year hired Merrill Lynch to explore the company's options, did not disclose the interested buyers.
Intuit Inc. jumped $3.84, or 13.9%, to $31.56 after the software maker said its third-quarter profit rose 23%. The company's fiscal 2007 profit forecast outstripped Wall Street's expectations.
Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange, where consolidated volume came to 2.92 billion shares, up from 2.79 billion Thursday.
The Russell 2000 index of smaller companies rose 8.02, or 0.98%, to 823.66.
Overseas, Japan's Nikkei stock average closed down 0.57%. Britain's FTSE 100 rose 0.94%, Germany's DAX index closed up 1.44% at its highest level of the year, and France's CAC-40 rose 1.23%.
The Dow Jones industrial average ended the week up 230.31, or 1.73%, at 13,556.53. The Standard & Poor's 500 index finished up 16.90, or 1.12%, at 1,522.75. The Nasdaq composite index ended down 3.77, or 0.15%, at 2,558.45
The Russell 2000 index finished the week down 5.88, or 0.71%, at 823.66.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 15,304.99, up 110.47 points for the week. A year ago, the index was at 12,760.07.