Stocks rose on Tuesday, lifted by recent mergers and talk that more are imminent.
Reports that the retailers Office Depot and OfficeMax are discussing a merger came after big corporate deals for Heinz and Dell were announced in recent weeks. Some investors are betting that more deals could be on the way as buyers pay premium prices for publicly traded companies.
The Dow rose 53.91 points to close at 14,035.67, approaching a nominal record of 14,164 reached in October 2007.
“It seems that investors are more comfortable with taking risk right now,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. That’s despite the $1.2 trillion in automatic federal spending cuts that are scheduled to start March 1 unless Congress and the White House find a way to avoid them. Congress returns from vacation next week.
Previous budget battles in Washington have rattled financial markets. But this time, many investors seem unfazed by the prospect that Congress won’t stop the “sequester” from kicking in. One reason is that the cuts are spread across the board for a decade, instead of all at once.
“I think investors are actually comforted by it,” Ablin said. “It’s not ideal. But if Congress can’t do it when left to their own devices, this is the next best thing.”
In other trading Tuesday, the Standard Poor’s 500-stock index rose 11.15 points to 1,530.94. The Nasdaq composite index gained 21.56 points to 3,213.59. Google crossed $800 for the first time.
The gains were widely shared, if slight. Nine of the 10 industry groups tracked by the S. P. 500 inched higher, led by energy companies. More than two stocks rose for every one that fell on the New York Stock Exchange.
Markets were also higher in Europe after news that the German economy was picking up steam. Indexes rose more than 1 percent in Germany and France.
Stocks of office supplies stores rose after the possible merger reports about OfficeMax and Office Depot.
OfficeMax rose $2.25 to $13, a gain of 21 percent, and Office Depot was up 43 cents to $5.02, a gain of 9 percent. Staples also rose as investors anticipated more mergers ahead.
Analysts cautioned that antitrust regulators could block mergers in the office supply business. Staples, for instance, tried to buy Office Depot in 1997, but was stopped by the Federal Trade Commission.
Health insurers fell after the release of preliminary government data that suggested rate cuts to Medicare Advantage plans for next year would be greater than anticipated.
The two largest Medicare Advantage providers, Humana and UnitedHealth, sank. Humana had the biggest loss in the S. P. 500, dropping 6 percent, or $4.98, to $73.01. UnitedHealth fell 66 cents to $56.66.
The government says it expects costs per person for Medicare Advantage plans to fall more than 2 percent in 2014. The government uses this figure as a benchmark to determine payments for these privately run versions of the government’s health care program for the disabled and those 65 and older.
Interest rates were higher. The Treasury’s benchmark 10-year note fell 7/32 to 99 24/32 and the yield rose to 2.03 percent from 2.01 percent late Friday.
The markets were closed on Monday in observance of Washington’s Birthday.
Article source: http://www.nytimes.com/2013/02/20/business/daily-stock-market-activity.html?partner=rss&emc=rss