Merger Activity Helps Push U.S. Stocks Higher
Fresh merger and acquisition activity helped lift U.S. stocks higher in a holiday-shortened week that was otherwise light on trading catalysts.
The Dow Jones Industrial Average advanced 110.90 points (0.67 percent) for the week to 16,717.17, setting a fresh record on Friday.
The broad-based S&P 500 tacked on 23.04 (1.21 percent) to 1,923.57, also a new record, while the tech-rich Nasdaq Composite Index rose 56.81 (1.36 percent) to 4,242.62.
The week started on a disappointing note for champions of mergers and acquisitions when drugmaker Pfizer abandoned its controversial campaign to acquire British pharma company AstraZeneca after the latter rebuffed repeated approaches.
But two other large deals were still very much alive at week's end, lending upward momentum to the market as a whole.
Such heavy merger and acquisition activity "moves sectors as people start to think about who could be next," said Art Hogan, chief market strategist at Wunderlich Securities.
Hogan called the heavy bidding activity the week's "biggest" catalyst.
Canadian pharmaceutical firm Valeant Pharmaceuticals International raised its bid on Wednesday for Botox-maker Allergan and then raised it again on Friday to about $53.5 billion.
Allergan, which has until now opposed Valeant's offers, said it would "carefully review and consider" the latest bid. Allergan finished the week 0.5 percent higher, while Valeant fell 1.7 percent.
The food industry was also in focus as U.S. meat processing giant Tyson Foods and Brazilian heavyweight JBS both launched unsolicited takeover campaigns for Hillshire Brands, the former Sara Lee Corporation, which makes Ballpark hot dogs, Jimmy Dean and Aidells sausages, and Sara Lee desserts.
Hillshire finished the week nearly 44 percent higher after the $6.4 billion bid from JBS unit Pilgrim's Pride was followed by Tyson's $6.8 billion proposal.
The dual bids from Pilgrim's Pride (+1.4 percent) and Tyson (+6.9 percent) threatened Hillshire's effort to close out its own $6.6 billion acquisition of Pinnacle Foods (-5.9 percent), whose portfolio includes Duncan Hines cake mix and Log Cabin pancake syrup.
Merger and acquisition activity is a driver for stocks "because it's not just the target company that goes up. If the deal's right, it's the acquirer that goes up as well," Hogan said.
He said a loser in the Tyson-Pilgrim's Pride acquisition battle for Hillshire could undertake another deal.
The week's most prominent economic report showed U.S. gross domestic product fell at an annual rate of 1.0 percent in the first quarter, worse than the 0.5 percent decline projected by analysts and the first quarter of negative growth in three years.
However, investors essentially overlooked the GDP data, in part because it was backward-looking and based on a period when cold weather crimped economic activity.
The economic calendar picks up next week with a heavy schedule of reports that includes construction spending, industrial orders, the Institute for Supply Management indices on manufacturing and service-sector activity and the closely-watched jobs report for May.
The Federal Reserve will also release its "Beige Book" of economic activity.
"We need good news," said Hugh Johnson, chairman of Hugh Johnson Advisors, who sees signs of investor caution despite the records for the Dow and S&P 500.
Source: Agence France Presse
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