Covidien Plc surged 20 percent after Medtronic Inc. agreed to buy the Irish company for $42.9 billion. Williams Cos. jumped 19 percent after agreeing to buy control of Access Midstream Partners LP for $6 billion. General Electric Co. dropped 0.8 percent after a group led by Siemens AG made a joint bid to carve up the energy unit of France’s Alstom SA. Yahoo! Inc. slid 5.8 percent, halting an eight-day rally, after Alibaba Group Holding Ltd. reported a slowdown in quarterly revenue growth.
The Standard & Poor’s 500 rose 0.1 percent to 1,937.78 at 4 p.m. in New York after fluctuating between gains and losses throughout the session. The Dow Jones Industrial Average added 5.27 points, or less than 0.1 percent, to 16,781.01. The Russell 2000 Index of small companies added 0.4 percent. About 5.4 billion shares changed hands today on U.S. exchanges, 13 percent below the three-month average.
“The market’s looking for a direction,” Stephen Carl, principal and head equity trader at New York-based Williams Capital Group LP, said in a phone interview. “The data wasn’t really robust. Some of it points to a more positive direction, but underlying, there’s still more to be proven. People are keeping an eye on Iraq and the broader geopolitical situation.”
The S&P 500 dropped 0.7 percent last week, snapping a three-week rally that had pushed equities to all-time highs, as Sunni insurgents in Iraq occupied more territory and oil prices jumped to an eight-month high.
Iraq’s sectarian violence showed no sign of abating, with Sunni Muslim militants and government forces fighting to control Tal Afar. Prime Minister Nouri al-Maliki, a Shiite, is fighting to reverse the advance of ISIL militants, who captured Iraqi’s largest northern city and other towns last week.
West Texas Intermediate crude erased gains, as Bank of America Corp. said the complete halt of Iraqi output, concentrated at the opposite end of the country, is “highly unlikely.” The price remained near a nine-month high.
Ukraine said Russia cut natural gas supplies after demanding fuel payments be made in advance, the first time shipments have been affected in this year’s crisis in relations between the two countries. Tensions escalated at the weekend with 49 servicemen killed when pro-Russia fighters shot down an aircraft.
“Investors are just trying to work the Iraqi situation through their mind and keep an even keel at this point,” Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion, said in a phone interview. “Numbers have been slightly better than consensus all the way through. We’re not exactly jumping, but there’s a little bit of optimism out there.”
Data today showed industrial production climbed more than forecast in May, a sign gains in manufacturing are supporting growth as the U.S. economy picks up. Output at factories, mines and utilities rose 0.6 percent after a revised 0.3 percent drop in April that was smaller than previously estimated, a report from the Federal Reserve showed.
The New York Fed’s Empire manufacturing report rose to 19.28, exceeding the average estimate of 15 in a Bloomberg survey of economists, a separate report indicated.
The Fed is watching economic data as it moves to complete a monthly stimulus program late this year. Policy makers meet this week, with a decision on rates and bond buying due June 18. The stimulus has helped propel the S&P 500 higher by as much as 188 percent from its bear-market low in March 2009.
The International Monetary Fund cut its growth forecast for the U.S. economy this year and said the Fed may have scope to keep interest rates at zero for longer than investors expect. The institution now sees the world’s largest economy growing 2 percent in 2014, down from an April estimate of 2.8 percent.
For the Fed, the forecast means “policy rates could afford to stay at zero for longer than the mid-2015 date currently foreseen by markets,” the fund said in its annual assessment of the U.S. economy.
Investors also considered equity valuations after the S&P 500 closed at an all-time high on June 9. The measure trades at 16.4 times the projected earnings of its members as of June 13, up from a multiple of 14.8 at the start of February. The Dow closed at a record on June 10.
A measure of volatility posted the biggest gain since April last week, rebounding from a seven-year low on June 6, as the Chicago Board Options Exchange Volatility Index (VIX) surged 14 percent to 12.18. The gauge known as the VIX rose 3.9 percent to 12.66 today, the highest since May 20.
Seven of the 10 main S&P 500 groups rose today. Utilities rallied 0.7 percent for the biggest advance and financial companies dropped 0.4 percent to pace declines.
GE lost 0.8 percent to $26.82. Siemens and Mitsubishi Heavy Industries Ltd. made a joint bid to carve up Alstom’s energy unit, challenging a $17 billion offer by GE. The planned bid may put pressure on GE to improve the terms of its offer for the French company’s energy assets.
Yahoo, which owns 22.6 percent of Alibaba, dropped 5.8 percent to $34.81. China’s largest e-commerce company reported a slowdown in quarterly revenue growth. Alibaba’s revenue rose 38.7 percent in the quarter ended March 31, down from 62 percent in the December quarter.
Vertex Pharmaceuticals Inc. plunged 8.7 percent to $67.12 for the steepest slide in the S&P 500. The drugmaker slid after an analyst Sanford C. Bernstein said phase three trials for the company’s VX809 Cystic Fibrosis drug have a “high” probability of failure, citing conversations with scientists.
Level 3 Communications Inc. fell 4.1 percent to $42.30. The Web content delivery company will pay a 12 percent premium to TW Telecom Inc.’s closing price last week, giving the company a direct connection to business customers. TW Telecom shares surged 7.3 percent to $38.99.
Covidien (COV) rallied 20 percent to a record $86.75. Medtronic will pay about 29 percent more than Covidien’s closing price on June 13, the companies said. The combined entity, called Medtronic Plc, will be based in Ireland for tax purposes.
Medtronic dropped 1.1 percent to $60.03 for a sixth day of losses, the longest streak in a year. Sanford C. Bernstein & Co. said the deal will allow it to challenge Johnson & Johnson as the world’s biggest medical-device company.
Williams Cos. climbed 19 percent to a record $56.02. The purchase would create one of the biggest U.S. transporters of fuel at a time of increased natural-gas exploration. Access Midstream rose 1.9 percent to $66.57.
Fusion-io Inc. soared 22 percent to $11.36. SanDisk Corp. agreed to purchase the maker of flash-memory technology for about $1.1 billion. The all-cash offer of $11.25 a share is 21 percent higher than Fusion-io’s closing price on June 13. SanDisk shares added 3.6 percent to $102.
Home Depot Inc. rose 1.1 percent to $78.90 for the biggest gain in the Dow. The largest U.S. home-improvement retailer advanced as the homebuilder confidence report provided a sign the residential real estate market is stabilizing after reeling from severe winter weather earlier this year.
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