U.S. stocks rose for the week, sending the Standard & Poor’s 500 Index to its longest winning streak in two years, amid optimism over corporate dealmaking and better-than-estimated economic data.
H.J. Heinz Co. rallied 19 percent after Warren Buffett’s Berkshire Hathaway Inc. and 3G Capital agreed to buy the ketchup maker. General Electric Co. climbed 3.5 percent as Comcast Corp. agreed to buy the remainder of NBC Universal. The S&P 500 fell on the last trading day as Wal-Mart Stores Inc. slumped after e-mails showed the world’s largest retailer had the worst sales start to a month in seven years.
The S&P 500 rose 0.1 percent to 1,519.79 for the week. The benchmark U.S. equity measure touched its highest level since Oct. 31, 2007, and reached a valuation last seen almost two years ago. The Dow Jones Industrial Average lost 11.21 points, or 0.1 percent, to 13,981.76. The gauge closed at a five-year high on Feb. 12.
“When Warren Buffett does a deal, people listen,” Chad Morganlander, a portfolio manager at Florham Park, New Jersey-based Stifel Nicolaus & Co., which manages $127 billion, said by telephone. “Investors are seeing a gradual improvement within the U.S. economy. That combined with very low volatility in financial markets is the perfect cocktail for mergers and acquisitions.”
The S&P 500 has rallied for seven straight weeks, the longest winning streak since January 2011. Among economic reports, claims for jobless benefits plunged in the latest week, showing U.S. employers have little need to trim staff as demand improves. Another report showed consumer confidence in the U.S. rose in February to a three-month high. Manufacturing in the New York region unexpectedly rebounded this month.
Almost $40 billion in deals were announced in the U.S. on Feb. 14, bringing the total this month to more than $140 billion, according to data compiled by Bloomberg. That already surpassed the total of $99.6 billion during the first two months of 2012.
Investors also watched corporate earnings. About 74 percent of the 393 S&P 500 companies which reported fourth-quarter earnings so far have beaten profit estimates, according to data compiled by Bloomberg.
Equities rose this week as President Barack Obama delivered his State of the Union address on Feb. 12 in Washington, calling for raising the federal minimum wage to $9 an hour and pledged to expand trade with Europe. He also proposed spending $50 billion on “urgent” infrastructure projects.
“It’s important that we continue to see the U.S. economy recovering,” said Jeff Morris, the Boston-based head of U.S. equities for Standard Life Investments, in a phone interview. His firm oversees $263 billion. “Given the run we’ve had, you’ll need to hear that drumbeat of better news to take the market higher.”
The S&P 500 is up 6.6 percent this year as U.S. lawmakers reached a budget compromise and has more than doubled since bottoming in March 2009 after the Federal Reserve conducted three rounds of bond buying to boost economic growth. The index is trading at 15 times earnings in the past year, the highest multiple since July 2011.
The Chicago Board Options Exchange Volatility Index, known as the VIX, lost 4.3 percent to 12.46 this week, trading near its lowest level since April 2007.
Heinz rallied 19 percent to $72.28 after Berkshire Hathaway and 3G Capital agreed to buy the ketchup maker for about $23 billion, ending the independence of an iconic ketchup maker that traces its roots to the 1860s.
GE jumped 3.5 percent to $23.29. Comcast, the largest U.S. cable company, will buy out GE’s ownership of NBC Universal for $16.7 billion, following through on the cable company’s purchase of a controlling stake two years ago. For GE, the deal turns an asset that didn’t fit with its business into a source of cash. The company will use proceeds to increase repurchases of its shares by $10 billion a year, GE said.
Constellation Brands Inc. surged 36 percent to $43.39 after winning full control of the Corona beer brand in the U.S. as Anheuser-Busch InBev NV sought to salvage its bid to buy the rest of Grupo Modelo SAB. 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. for about $2.9 billion.
Avon Products Inc. jumped 22 percent, its biggest rally since 1989, to $20.57 as profit topped estimates. Chief Executive Officer Sheri McCoy, who took the helm of the world’s largest door-to-door cosmetics seller in April, is cutting about 1,500 jobs and leaving the South Korea and Vietnam markets as part of a plan to save $400 million by the end of 2015. McCoy said she would seek strategic alternatives for the company’s Silpada jewelry unit, where sales fell 18 percent in the fourth quarter.
Herbalife Ltd. climbed 8.1 percent to $38.74. Billionaire investor Carl Icahn reported a 13 percent stake in the marketer of nutritional supplements and said he would seek talks with the company that hedge-fund manager Bill Ackman has accused of illegally operating a pyramid scheme. Strategic alternatives for Herbalife may include taking it private, Icahn said in a filing with the U.S. Securities and Exchange Commission.
Wal-Mart erased 3.1 percent to $69.30. The Bentonville, Arkansas-based company had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.
“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”
Coca-Cola Co. sank 3.5 percent to $37.42 for the biggest decline in the Dow this week. The company reported that global volume sales rose 3 percent in the fourth quarter, trailing the 5.4 percent growth estimated by Mark Swartzberg, an analyst at Stifel Financial in New York, who has a hold rating on the shares.
CenturyLink Inc. tumbled 20 percent, its biggest drop in almost 13 years, to $33.02. The phone and Internet carrier slashed its dividend by 26 percent to 54 cents. At least six analysts downgraded the stock following the move, unappeased by the company’s plans to buy back as much as $2 billion in stock.
Cliffs Natural Resources Inc. plunged 21 percent, the most since September 2011, to $28.85. The biggest U.S. iron ore producer cut its quarterly dividend by 76 percent and announced a share sale to repay debt.