Most U.S. stocks rose, with the Standard & Poor’s 500 Index (SPX) climbing to within eight points of a record, as a $25 billion deal to acquire Forest Laboratories Inc. offset slower growth in New York-area manufacturing.
Forest Laboratories surged 28 percent after Actavis Plc agreed to buy the maker of the Alzheimer’s drug Namenda. Coca-Cola Co. dropped 3.8 percent as fourth-quarter profit fell. D.R. Horton Inc. and PulteGroup Inc. lost more than 1.2 percent as a gauge of homebuilder confidence declined by the most on record in February amid bad weather that hurt sales.
The S&P 500 added 0.1 percent to 1,840.76 at 4 p.m. in New York, near its record close of 1,848.38 set last month. The Dow (INDU) Jones Industrial Average fell 23.99 points, or 0.2 percent, to 16,130.40. About 6.3 billion shares changed hands on U.S. exchanges, in line with the three-month average. The U.S. market was closed yesterday for the Presidents’ Day holiday.
“Weaker economic numbers have been shrugged off,” Eric Green, director of research and fund manager at Penn Capital Management, said by phone. The Philadelphia-based firm oversees about $7 billion. “It seems like the consensus view is that weather is a huge issue in the numbers. The outlook looks pretty benign right now. We can probably reach new highs in the near term in the equity markets.”
The S&P 500 finished its best week of the year within 0.5 percent of its all-time high on Feb. 14, amid better-than-forecast earnings and continued confidence in the strength of the world’s biggest economy.
Equities rose last week as Federal Reserve Chair Janet Yellen pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps.” Economic growth has strengthened and there is “broad improvement” in the labor market, she said, adding that only a “notable change in the outlook” for the economy would prompt the central bank to slow the pace of tapering.
The Fed will release minutes from its Jan. 28-29 meeting tomorrow, giving investors details on central bank policy makers’ decision to trim bond purchases by $10 billion for a second time. Three rounds of stimulus have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.
Investors have dismissed weaker-than-forecast economic data including January’s payrolls over the past two weeks, helping stocks recover from their worst start of a year since 2010. The S&P 500 had slumped as much as 5.8 percent since reaching a record on Jan. 15 as concern over Fed tapering fueled an exodus in emerging markets. The index has since climbed 5.7 percent, paring its 2014 loss to 0.4 percent.
Data today showed manufacturing in New York, northern New Jersey and southern Connecticut slowed this month. The Fed Bank of New York’s general economic index fell to 4.48 in February from 12.5 in January. Economists in a Bloomberg News survey predicted the index would decline to 8.5. Positive readings mean that activity expanded.
While the Fed has started slowing the pace of its bond buying, the Bank of Japan boosted lending programs today. The People’s Bank of China sold repurchase contracts for the first time since June, draining funds from the banking system.
“It seems as if central banks are driving markets again in the short run,” Jean-Paul Jeckelmann, who helps manage $1.5 billion in equities as chief investment officer of Banque Bonhote & Cie. in Neuchatel, Switzerland, said in an interview. “On one side, the BOJ increased the size of lending facilities, on the other the PBOC drained liquidity from the money markets. The story around central banks is far from over.”
A total of 12 S&P 500 companies were due to report earnings today. About 74 percent of those that have posted results for the fourth quarter have beaten estimates for profit and 64 percent have exceeded sales projections, according to data compiled by Bloomberg. Companies in the gauge are exceeding analyst revenue forecasts by the most since 2012, a sign rising consumer demand is fueling economic expansion.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, climbed 2.2 percent to 13.87 today, its first increase in seven sessions. The VIX has gained 1.1 percent this year.
Seven out of 10 main groups in the S&P 500 rose, as health-care shares advanced 0.9 percent for the biggest increase.
Forest Labs jumped 28 percent to $91.04. Actavis, the world’s second-largest generic-drug maker by market value, is buying Forest for about $25 billion in a deal that will transform it into a developer of brand-name drugs. Actavis rallied 5 percent to $201.47.
The deal is a win for billionaire investor Carl Icahn, Forest’s second-largest holder who gained seats on the company’s board in 2012 and 2013, and pushed for a sale. It also comes after Comcast Corp. last week announced the year’s biggest deal, a $45 billion agreement to acquire Time Warner Cable Inc.
Other pharmaceutical companies also rallied today. Drug maker Mylan Inc. climbed 4.8 percent to a record $48.30, and Regeneron Pharmaceuticals Inc. added 2.7 percent to $332.78, also an all-time high.
Zynga Inc. increased 5.8 percent to $5.15. The social gaming company reached a 19-month high after King Digital Entertainment Plc, the maker of popular smartphone games including “Candy Crush Saga,” filed to raise $500 million in an initial public offering in the U.S. today. The amount King Digital is seeking to raise is a placeholder used to calculate fees and may change.
J.M. Smucker Co. rallied 3.8 percent to $95.31 after being upgraded to overweight at Stephens Inc. The jam maker slumped 3.5 percent on Feb. 14 after forecasting a bigger sales decline than analysts had anticipated.
Coca-Cola fell 3.8 percent to $37.47 for the steepest drop in the Dow and its biggest loss since August 2011. Chief Executive Officer Muhtar Kent, facing slowing growth in emerging markets, said the company will pare supply and data-management costs and overhaul marketing programs to generate $1 billion in savings by 2016. Global sales volume rose 2 percent for the year and 1 percent for the quarter, less than the 4 percent annual and 3 percent quarterly growth reported a year ago.
Kansas City Southern lost 4.5 percent to $91.67. JPMorgan Chase & Co. cut the railroad operator to neutral from overweight, citing risks from proposed legislation in Mexico that would open access to third parties and require rates in some private contracts to be published.
An S&P index of homebuilders slid 1 percent, with 10 of its 11 members declining. The National Association of Home Builders/Wells Fargo sentiment gauge slumped to 46 this month from 56 in January. Snowstorms last week from the South to the Northeast helped reduce homebuyer traffic to its slowest pace since April.
Purchases and sales expectations also declined as builder confidence deteriorated from coast to coast, signaling construction will contribute less to economic growth at the start of 2014.
D.R. Horton lost 1.3 percent to $23.31 and PulteGroup slid 1.2 percent to $19.79.
Waste Management Inc. slid 4.5 percent to $41.72. The garbage hauling company reported fourth-quarter profit that missed estimates and forecast earnings for the year below the average analyst projection.
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