Bloomberg News

Stocks Advance as Deals Spur Pharmaceuticals Rally; Oil Retreats

April 22, 2014

A Logo sits on a Glass Door Outside Novartis AG's Headquarters

Novartis AG agreed to buy Glaxo’s cancer-drug business for as much as $16 billion while selling most of the company’s vaccines division to Glaxo for $7.1 billion and its animal-health unit to Eli Lilly & Co. for $5.4 billion. Photographer: Gianluca Colla/Bloomberg

U.S. stocks rose for a sixth day, the longest streak since September, amid a rally in drugmakers after more than $70 billion in global takeover offers. Oil fell the most in three months and coffee rose to a two-year high.

The Standard & Poor’s 500 Index (SPX) added 0.4 percent to 1,879.55 at 4 p.m. in New York, bringing it within 1 percent of its closing record of 1,890.90 on April 2. The Stoxx Europe 600 Index gained 1.4 percent. Allergan Inc. soared 15 percent and AstraZeneca Plc jumped 4.7 percent. West Texas Intermediate crude slid as much as 2.4 percent on estimates that U.S. supplies rose last week. Coffee futures surged as much as 8.3 percent on growing concern a drought in Brazil will create a supply shortage.

A wave of acquisitions across the pharmaceutical industry boosted share prices. Novartis AG agreed to buy GlaxoSmithKline Plc (GSK)’s cancer-drug business for as much as $16 billion while selling most of the vaccines division to Glaxo and an animal-health unit to Eli Lilly & Co. Valeant Pharmaceuticals International Inc. offered to buy Allergan in a cash-and-stock deal valued at $45.7 billion. Thirty companies in the S&P 500 disclose results today, while a further 121 members report before the end of the week.

“We wouldn’t be surprised if you saw a significant rally through the end of the year,” James Abate, who oversees about $1 billion as chief investment officer at Centre Asset Management in New York, said in a phone interview “There’s been a leadership change towards higher-quality, mostly stable companies.”

Drugmakers Rally

Health-care stocks in the S&P 500 added 1 percent, the biggest gain among 10 main industries.

AstraZeneca jumped after reports that Pfizer Inc. discussed acquiring the drugmaker in informal, now-discontinued talks. The two companies aren’t currently negotiating, people familiar with the matter told Bloomberg News.

Netflix Inc. added 7 percent after saying it expects to increase prices for new customers. Harley-Davidson Inc. climbed 6.4 percent after its earnings release.

“Sentiment had gotten too negative, and some decent earnings reports have started helping the market,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “That, combined with the positive deal talk and chatter in health care, gives a better tone to the market overall and certainly some support.”

Transportation Index

The Dow Jones Transportation Index jumped 0.6 percent to an all-time high. United Continental Holdings Inc. and Delta Air Lines Inc. rose at least 3 percent to pace gains.

The MSCI Emerging Markets Index slid 0.2 percent and Russian stocks fell as an accord designed to ease tension in Ukraine showed signs of collapsing.

Ukraine’s president urged the resumption of an offensive against militants after U.S. Vice President Joe Biden’s visit as an agreement with Russia to ease tensions in the former Soviet republic’s east neared collapse.

Nickel futures advanced 2.2 percent, climbing for a third day on speculation turmoil in Ukraine will lead to supply disruptions from Russia, the second-largest producer of the refined metal.

Treasury two-year notes were set to be sold today at the second-highest yield at an auction of the security since 2011 on speculation the Federal Reserve will raise interest rates before the debt matures. The two-year securities have returned 0.3 percent this year through yesterday, compared with 1.9 percent for the broader Treasury market, according to Bank of America Merrill Lynch indexes.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed, after a seven-day rally added 0.6 percent to the gauge.

WTI for May delivery, which expires today, fell $2.24 to settle at $102.13 a barrel, capping the biggest drop since Jan. 2. Crude stockpiles in the U.S., the world’s biggest oil consumer, probably increased for the 13th time in 14 weeks, a Bloomberg News survey shows before Energy Information Administration data tomorrow.

To contact the reporters on this story: Inyoung Hwang in London at ihwang7@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron


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