The Standard & Poor’s 500 Index climbed to a five-year high as a drop in jobless claims and Warren Buffett’s deal for H.J. Heinz Co. overshadowed concern over shrinking economies in Europe and Japan.
Heinz surged 20 percent after Buffett’s Berkshire Hathaway Inc. and 3G Capital agreed to buy the company in a deal valued at about $23 billion. Constellation Brands Inc. soared 37 percent after Anheuser-Busch InBev NV offered to cede full control of U.S. distribution for Corona beer in a bid to salvage its deal for Grupo Modelo. US Airways Group Inc. dropped 4.6 percent after agreeing to an $11 billion merger with AMR Corp.’s American Airlines.
The S&P 500 rose 0.1 percent to 1,521.38 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 9.52 points, or 0.1 percent, to 13,973.39. About 6.4 billion shares traded hands on U.S. exchanges today, 4.1 percent above the three-month average.
“Corporate America is a little more optimistic,” Ted Harper, who helps manage about $8 billion for Frost Investment Advisors LLC in Houston, said by phone. “Companies have repositioned, they have become far leaner and are looking for opportunities to deploy capital incrementally for growth.”
Global economic data today showed the recession in the euro area deepened, with the worst performance in almost four years. In Japan, gross domestic product shrank an annualized 0.4 percent, amid falling exports and a business-investment slump.
Equities erased early losses as Labor Department figures showed U.S. jobless claims decreased by 27,000, the most in a month, to 341,000 in the week ended Feb. 9. The level of filings trailed any projection in a Bloomberg survey in which the median forecast was 360,000.
The S&P 500 has climbed 6.7 percent in 2013 as U.S. lawmakers reached a budget compromise. It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond buying to lower interest rates and boost economic growth.
Seven out of 10 groups in the benchmark index advanced today as energy companies gained the most, rising 0.5 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, fell 2.5 percent to 12.66.
Heinz rallied $12.02 to $72.50 and Berkshire Hathaway’s Class A shares jumped 1 percent to $149,240. Both companies closed at a record high.
Buffett’s Berkshire and 3G Capital agreed to buy Heinz as the billionaire chairman increases his bets on consumer products. The buyers will pay $72.50 a share, compared with yesterday’s closing price of $60.48, according to a statement. The deal is valued at about $28 billion including debt.
Other consumer stocks gained. Campbell Soup Co., the world’s largest soup maker, climbed 1.4 percent to $38.72 while General Mills Inc., the maker of Cheerios cereal, advanced 3.1 percent to $44.31.
Constellation surged $11.87 to a record $43.75. InBev, the world’s biggest brewer, offered to cede full control of Corona distribution in the U.S. to Constellation for $2.9 billion after U.S. regulators sued to block its purchase of Grupo Modelo. Constellation will gain Modelo’s brewery in Piedras Negras, which is located in Mexico near the Texas border, and perpetual rights for the Corona and Modelo brands in the U.S., Leuven, Belgium-based AB InBev said.
US Airways slipped 67 cents to $13.99 after the company said it will combine with AMR’s American Airlines to create the world’s largest carrier. AMR’s bankruptcy creditors will own 72 percent of the new company, and US Airways stockholders will get 28 percent.
About $36 billion in deals were announced in the U.S. today, bringing the total to $145.8 billion so far this year, according to data compiled by Bloomberg. That already surpassed the total of $99.6 billion during the first two months of 2012.
“We’re positive on the fact that M&A will continue to move higher,” said Jeff Morris, the Boston-based head of U.S. equities for Standard Life Investments, in a phone interview. His firm oversees $263 billion in assets. “If we can get some clarity in Washington and if the economy continues to grow, I think you’ll see more and more companies use M&A.”
Record corporate profits and cheap borrowing costs are attracting buyers even as stock prices soar to a five-year high. The S&P 500 is 2.8 percent below its record of 1,565.15 reached in October 2007. The Dow is about 1.4 percent below its all-time high of 14,164.53.
About 73 percent of the 388 companies in the S&P 500 that have released results so far in the quarter exceeded profit projections. Sixty-seven percent have surpassed sales estimates, according to data compiled by Bloomberg.
Phone stocks fell the most among S&P 500 groups today, sinking 2 percent. CenturyLink Inc. plunged 23 percent to $32.27 after cutting its dividend by 26 percent to 54 cents a share and forecasting first-quarter sales that missed analysts’ estimates.
Cisco Systems Inc. slipped 0.7 percent to $20.99. The world’s largest maker of computer-networking gear forecast third-quarter revenue will increase 4 percent to 6 percent from a year earlier, indicating revenue of $12.1 billion to $12.3 billion. Analysts on average predicted sales of $12.2 billion, according to data compiled by Bloomberg.
MetLife Inc. retreated 2.2 percent to $36.69. The largest U.S. life insurer said fourth-quarter profit declined 87 percent on costs tied to lower interest rates and annuities.
General Motors Co. fell 3.2 percent to $27.75. The automaker’s fourth-quarter profit trailed analysts’ forecasts as Europe losses weighed down the results.
Whole Foods Market Inc. dropped 9.7 percent to $87.50. The largest natural-foods store in the U.S. lowered its sales forecast for fiscal 2013. Sales may increase as much as 11 percent in fiscal 2013, compared with a previous estimate for growth of as much as 12 percent, Whole Foods said.
TripAdvisor Inc. fell 7.1 percent to $43.55. The online travel-recommendation service spun off from Expedia Inc. said it expects earnings before interest, taxes, depreciation and amortization to grow at a percentage rate of “high single digit” in 2013. The forecast “came in lower than expected,” Anthony DiClemente, an analyst at Barclays Plc, wrote in a note.
Weight Watchers International Inc. tumbled 17 percent to $44.91. The company forecast annual earnings of $3.50 to $4 a share, compared with the $4.75 average estimate in a Bloomberg survey of analysts.