US stocks managed modest gains today as investors saw a series of corporate acquisitions as a chance to pick up bargains in an otherwise difficult market. Another record high for oil prices muted the gains.
General Electric’s US$1.6bn (€1.3bn) investment in a Turkish bank and Johnson Controls’s takeover of York International assured investors that corporate America is still willing to spend money to expand, even in uncertain economic times.
Yet oil again weighed on investors. Crude futures reached US$68 (€55.30) per barrel overnight and settled at a record high for a second straight session - feeding Wall Street’s chronic concerns about a slowdown in consumer spending and economic growth. A barrel of light crude settled at US$67.49 (€54.89), up 17 cents, on the New York Mercantile Exchange.
“Oil prices at these levels are providing all kinds of dislocation issues for stocks,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co.
“Earnings and the economic data are OK, but with oil where it is, the market is unable to make a decision, long or short, and there’s certainly no real catalyst for buying.”
The Dow Jones industrial average rose 15.76, or 0.15%, to 10,450.63.
Broader stock indicators were also slightly higher. The Standard & Poor’s 500 index gained 2.78, or 0.23%, to 1,212.37, and the Nasdaq composite index climbed 5.46, or 0.26%, to 2,134.37.
Bonds traded in a narrow range, with the yield on the 10-year Treasury note slipping to 4.16% from 4.17% late on Wednesday. The dollar lost ground against most major currencies, while gold prices rose.
A drop in US unemployment claims also helped spur buying. The Labour Department reported that first-time jobless claims dropped by 4,000 to 315,000 last week, and that the four-week average of claims fell to its lowest level in four years.
Yet oil remained the focus, and some analysts wondered whether the markets could stage any kind of substantive rally with crude futures at record levels and the Federal Reserve undeterred in its policy of slow, steady interest hikes.
“Oil is a huge concern, interest rates are a huge concern, and you have to be concerned about the two of them together,” said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati. “There’s room to run to the downside, but I have a hard time seeing a lot of upside right now.”
While investors kept a wary eye on oil, GE’s purchase of a 25.5% share in Garanti Bank, Turkey’s third-largest privately owned bank, was seen as a positive as the company expands its consumer finance business overseas. However, rising oil prices pressured industrial stocks, and General Electric fell 4 cents to 33.50.
York International surged 36%, or 15.04, to 56.799 after Johnson Controls announced a US$2.4bn (€1.95bn), or US$56.50 (€45.95) per share, cash buyout of the company, which would double Johnson’s presence in building heating and air-conditioning markets. Johnson Controls, which will also assume US$800m (€650.66m) in York debt, climbed 2.76 to 59.53.
Eastman Kodak said it would slash 900 jobs in Rochester, New York, and in China as it consolidates its colour photographic paper manufacturing. Its Rochester plant will close by October, the company said, and the total effort will result in a US$173m (€140.71m) write-off charge. Kodak edged 4 cents lower to 25.
Amusement park operator Six Flags jumped 11%, or 72 cents to 7.26 after the company announced it would put itself up for sale. The company said it would invite shareholder Daniel Synder, the millionaire Washington Redskins owner who has been critical of Six Flags’ performance, to participate in an auction, though it will oppose Synder’s efforts to wage a proxy battle for more seats on the company board.
Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange, where volume totalled 1.2bn shares, compared with 1.45bn at the same point on Wednesday.
The Russell 2000 index of smaller companies rose 2.69, or 0.41%, to 657.70.