Dow Tops 13,300 on Merger News

Alcoa offers to acquire Alcan, keeping the buying spree alive and well on Wall Street

The Dow Jones industrial average sailed through 13,300 to another peak Monday thanks to more deal news. The big one of the day was Alcoa (AA) offered to acquire Alcan (AL) in a $33 billion deal. But the Nasdaq dipped amid losses in Yahoo (YHOO) shares after the search giant denied rumors circulating Friday of merger talks with Microsoft (MSFT).

The Dow Jones industrial average rose 48.35 points, or 0.36%, to a new record close of 13,312.97. The broader S&P 500 index was up 3.86 points, or 0.26%, to 1,509.48. The tech-heavy Nasdaq Composite index lost 1.2 points, or 0.05%, to 2,570.95.

Among the deal news Monday, Alcoa offered $58.60 in cash and 0.4108 Alcoa share for each Alcan share.

Ohio Casualty (OCAS) shot up after it agreed to be acquired by Liberty Mutual Group for $44 per share, in a deal valued at about $2.7 billion.

Armor Holdings (AH) agreed to be acquired by BAE Systems Inc. (BAESY) for $88 per share through a one-step merger.

At the Berkshire Hathaway (BRK.B) annual meeting Saturday, Warren Buffett said he would take no more stakes in the newspaper industry, and would like to buy a "huge" company and warned again about the hazards of financial derivatives.

Among other stocks moving, Dow component General Motors (GM) lost 2.5% as its supplier Delphi posted a wider first-quarter loss.

S&P noted that some investors might have found comfort in a raised earning outlook from Abbey Joseph Cohen at Goldman Sachs. She raised her 2007 S&P 500 operating EPS estimate to $93 from $92, and sees $100 for 2008. She says strength in exports and currency translation gains could provide upward surprises, while more conservative loan loss reserving could be a drag. And she noted that these estimates imply that EPS growth in 2007 and 2008 will slow to about mid-single digits from a growth rate of about 22% in 2006.

This week's main event is the Federal Reserve's policy meeting Wednesday. Most economists expect the Fed to keep the federal funds target rate at 5.25%, and don't see any big changes in its statement. Nearly all Fedwatchers believe the FOMC will retain a hawkish tilt by keeping the phrase that the "predominant policy concern remains the risk that inflation will fail to moderate as expected," says Action Economics.

There were no economic reports today. Wholesale inventories will be reported tomorrow, and business inventories come on Friday. The trade deficit data comes out Thursday, followed by PPI and retail sales on Friday.

In the energy markets, June NYMEX crude oil was down 45 cents to $61.48 a barrel, on rising U.S. stockpiles and refinery restarts, says Action Economics.

European stock markets moved slightly higher. In London, the market was closed. Germany's DAX index was up 0.12% to 7,525.69. In Paris, the CAC 40 index lost 0.04% to 6,071.48.

Asian markets also moved up. In Japan, the Nikkei index rose 1.58% to 17,669.83. In Hong Kong, the Hang Seng index added 0.27% to 20,896.64.

Treasury Market

Treasury yields were mixed amid light curve and option activity ahead of the mid-week FOMC meeting, says Action Economics. The 10-year yield was flat at 4.64%.