Takeover deals spark small Wall Street boost

Wall Street managed a moderate advance today as a spate of takeover deals gave investors enough confidence to buy into the market despite a report showing that US manufacturing is more sluggish than expected.

Investors drew support from big acquisitions announced before trading began, including deals to take credit card transaction processor First Data and media conglomerate Tribune private.

But the gains were limited by the Institute for Supply Management’s manufacturing index, which slipped more than economists projected in March. The index moved to a reading of 50.9 last month, compared to an expected reading of 51.0.

Also, putting pressure on technology stocks, the Semiconductor Industry Association said total sales in February fell to 20.09 billion dollars from 21.48 billion dollars in January due to seasonal weakness, lower manufacturing capacity and price cuts.

Wall Street has traded nervously over the past few weeks on concerns about rising inflation and the overall health of the economy.

On Friday, the major indexes finished the first quarter lower – with the Dow Jones industrials down 108 points in their feeblest performance since the second quarter of 2005.

St Louis Federal Reserve President William Poole said in a speech to bankers in New York that inflation is still a “major concern.”

He said inflation levels could require more rate hikes, and that a US recession remains conceivable. But Poole, whose comments have moved stocks in the past, had little lasting impact today.

“If you’re listening to the Fed, this is just more of the same – I think the focus is going to turn from little bits of data on inflation to earnings very quickly,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.

“The Fed just doesn’t want everyone to get excited about a rate cut, and we’ll see an even bias out of them for the next few months.”

The Dow rose 27.95, or 0.23%, to 12,382.30. The benchmark index is now 404 points below its record close reached February 20.

Broader stock indicators were also slightly higher. The Standard & Poor’s 500 index rose 3.69, or 0.26%, to 1,424.55, and the Nasdaq composite index edged up 0.62, or 0.03%, to 2,422.26.

Bonds moved lower after the ISM report showed slower growth amid accelerating price pressures. The yield on the benchmark 10-year Treasury note rose to 4.65% from 4.63% at Friday’s close. The dollar was lower against other major currencies, while gold prices rose.

Oil prices advanced slightly as investors continued to speculate about how tensions between Iran and Britain could interrupt supply from the Middle East. A barrel of light sweet crude rose 7 cents to 65.94 dollars on the New York Mercantile Exchange.

Arthur Hogan, chief market analyst at Jefferies & Co, said oil has been one concern weighing on markets. He believes the market continues to look for some kind of economic direction, while also reacting to corporate news.

“That’s the battle we’re going to have – are we starting the quarter with good company news or will we continue to be concerned about an economic slowdown?” he said. “That’s the argument.”

First Data spiked 5.55 dollars, or 21%, to 32.45 dollars after Kohlberg Kravis Roberts & Co agreed to take it private in a 29 billion dollars deal. This is one of the largest private equity deals of the year, coming in second only to KKR’s deal to buy energy company TXU for 31.8 billion dollars.

Also going private is Tribune, which accepted a buyout offer from real estate investor Sam Zell in a deal valued at about 8.2 billion dollars. Shares of the media company that owns the Chicago Tribune and the Los Angeles Times rose 70 cents, or 2.2%, to 32.81 dollars.

Web search leader Google is said to be interested in buying advertising placement firm DoubleClick in a deal worth about 2 billion dollars, according to The Wall Street Journal. Microsoft was also reported to be interested in buying the company. Google rose 37 cents to 458.53 dollars, while Microsoft edged down 13 cents to 27.74 dollars.

In other corporate news, Kraft Foods shares fell 81 cents, or 2.6, to 30.96 dollars after it was spun off from former parent Altria Group. The maker of Marlboro cigarettes rose 2.32 dollars, or 3.5%, to 68.22 dollars.

Starwood Hotels & Resorts Worldwide rose 2.97 dollars, or 4.6%, to 67.82 dollars. It announced Steven Heyer has resigned as chief executive and a director after the company’s board lost confidence in his leadership. The company also reaffirmed its first-quarter and full-year guidance.

Home lenders were weak after New Century Financial filed for Chapter 11 bankruptcy, and M&T Bank said it expects first-quarter profit to be hurt by its mortgage business. M&T shares fell 9.88 dollars, or 8.5%, to 105.95 dollars. Countrywide Financial fell 91 cents, or 2.7%, to 32.73 dollars.

Apple shares rose 74 cents to 93.65 dollars after it reached an agreement with EMI Group to sell the record label’s songs online without copy protection software. However, the deal did not include The Beatles catalogue.

The Russell 2000 index of smaller companies was up 2.51, or 0.31%, at 803.22.

Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange, where volume came to 1.50 billion shares, down from 1.59 billion shares on Friday.