Deal news pushes US stocks higher

Another quiet day, another quiet record on Wall Street.

Stocks rose modestly yesterday, sending the Standard & Poor’s 500 index to another record high.

Investors rallied behind a bidding war in the food industry as well as a quite positive report on the US labour market.

The S&P 500 rose 10.25 points, or 0.5%, to 1,920.03, closing above Tuesday’s record of 1,911.11.

The Dow Jones industrial average rose 65.56 points, or 0.4%, to 16,698.74 and the Nasdaq composite rose 22.87 points, or 0.5%, to 4,247.95.

Among the biggest gainers was deli meat and hotdog maker Hillshire Brands, which jumped 7.95 dollars, or 18%, to 52.76 dollars.

Only two days after Pilgrim’s Pride made a 5.56 billion dollar offer to buy the company, chicken company Tyson Foods stepped in to offer 6.2 billion dollars.

Investors expect that Tyson’s offer will start a bidding war. Hillshire’s closing price of 52.76 dollars was already above Tyson’s offer of 50 dollars per share. The stock is up 43% this week alone.

Tyson also rose on the news. The stock gained 2.50 dollars, or 6%, to 43.25 dollars, making the company the biggest gainer in the S&P 500.

The overall stock market has moved little this year, but one theme that continues to play out is the large amount of corporate deals being announced.

Just during this holiday-shortened week, Apple said late Wednesday it would buy Beats Electronics for 3 billion dollars, and now there’s the battle over Hillshire Brands.

“It’s an encouraging sign because companies see the economy improving,” said Joe Tanious, a global markets strategist with JP Morgan Asset Management.

“Last thing you want to do as a large company is use your cash to buy a company when you have an uncertain outlook on the economy.”

Other food companies also rose following the Hillshire Brands news as traders anticipated more deals and possibly more bidding wars.

Investors also had a round of mixed economic data to interpret yesterday.

The commerce department estimated that the US economy shrank at an annual rate of 1% in the first three months of the year, worse than the government’s initial estimate a month ago of growth of 0.1%.

The contraction was partly due to the severe weather in January and February, economists said.

While disappointing, investors set aside the GDP report, dismissing it as outdated information on the US economy.

The report relayed information from, at best, two months ago and, at worst, from the beginning of the year. Investors have been talking about how the weather impacted on US businesses earlier this year for months now.

“It didn’t tell us anything new,” said Ryan Larson, head of equity trading at RBC Global Asset Management.

In a more “real-time” reading on the US economy, the government also said the number of Americans applying for unemployment benefits dropped last week to 300,000, according to the labour department.

The less-volatile four-week average fell to 311,500, the lowest since August 2007, right before the last recession.

Bond prices pulled back slightly, pushing the 10-year U.S. Treasury note to a yield of 2.46% from 2.44% the day before.