U.S. stocks rose for the fifth time in six days, driving the Standard & Poor’s 500 Index to a record, after Tyson Foods Inc. offered to buy Hillshire Brands Co. and investors speculated the economy is improving following a contraction in the first quarter.
Hillshire Brands jumped 18 percent after Tyson made a $6.8 billion offer to buy the company, trumping a competing bid from Pilgrim’s Pride Corp. Tyson added 6.1 percent for the biggest gain in the S&P 500. Biogen Idec Inc. climbed 3.6 percent after JPMorgan Chase & Co. raised its recommendation on the biotechnology company. Abercrombie & Fitch Co. jumped 5.8 percent as the clothing retailer posted a smaller-than-estimated quarterly loss.
The S&P 500 added 0.5 percent to 1,920.03 at 4 p.m. in New York. The gauge fell 0.1 percent from a record yesterday. The Dow Jones Industrial Average gained 65.56 points, or 0.4 percent, to 16,698.74. The Nasdaq 100 Index increased 0.6 percent to the highest level since September 2000.
“No matter what that GDP number was, the underlying backdrop is that the data is improving,” Sam Turner, a fund manager with Richmond, Virginia-based Riverfront Investment Group LLC, said in a phone interview. His firm oversees $4.6 billion. “We had two months there where small caps, higher momentum names really took it on the chin. Now they’re oversold and start to see some recovery.”
Today’s gain helped the Nasdaq 100 recoup all its 7.5 percent loss since early March. The Russell 2000 Index of small companies added 0.3 percent, extending its rebound from a low on May 15 to 4 percent.
The S&P 500 has rallied 5.8 percent since a selloff in small-cap and Internet shares spread to the broader market and dragged the benchmark index to a two-month low in April. The gauge has advanced 184 percent from its bear-market low in March 2009.
About 5.1 billion shares changed hands on U.S. exchanges today, 19 percent below the three-month average.
The U.S. economy contracted for the first time in three years from January through March as companies added to inventories at a slower pace and curtailed investment. Gross domestic product fell at a 1 percent annualized rate in the first quarter, a bigger decline than projected, after a previously reported 0.1 percent gain, the Commerce Department said.
A pickup in receipts at retailers, stronger manufacturing and faster job growth indicate the first-quarter setback will prove temporary as pent-up demand is unleashed. Federal Reserve policy makers said at their April meeting that the economy has strengthened after adverse weather took its toll.
“The next couple of quarters are going to be a lot stronger,” said Philip Orlando, the New York-based chief equity-market strategist at Federated Investors Inc., said by phone. He helps oversee around $400 billion. “The market ought to be able to read through this and begin to price in better economic growth.”
Fewer Americans than forecast filed applications for unemployment benefits last week, a sign the labor market continues to strengthen. Jobless claims fell by 27,000 to 300,000 in the week ended May 24, a government report showed.
The Chicago Board Options Exchange Volatility Index slipped 0.6 percent to 11.61 today. It is about 3 points from a record low.
Nine of the 10 main S&P 500 groups advanced, with producers of consumer staples and raw materials gaining at least 0.8 percent to pace increases.
Hillshire added 18 percent to $52.76. Tyson is offering $50 a share, representing a deal premium of 35 percent, the company said. Tyson is looking to expand further into branded, value-added packaged foods that have wider margins and more stable earnings. Tyson advanced 6.1 percent to $43.25.
Biogen Idec climbed 3.6 percent to $319.85. The biotechnology company was raised to overweight from neutral by JPMorgan analysts. Biogen has an “impressive” number of drugs in later stages of development and JPMorgan’s survey of doctors suggested the potential of increased use of the multiple sclerosis drug Tecfidera, analyst Geoff Meacham wrote in a note.
Abercrombie & Fitch jumped 5.8 percent to $37.14. New styles of shorts and crop tops slowed its sales decline. Chief Executive Officer Mike Jeffries has been working to revive Abercrombie’s appeal among teenage shoppers who’ve strayed from the chain in favor of fast-fashion purveyors such as Forever 21 and Hennes & Mauritz AB.
Palo Alto Networks Inc. climbed 5.3 percent to $73.17. The company posted third-quarter adjusted earnings per share of 11 cents, compared with the 10 cents analysts had estimated. It reported revenue of $150.7 million, topping the $146.2-million analyst forecast.
Twitter Inc. gained 0.7 percent to $34 as Cantor Fitzgerald LP raised the stock to a buy from hold. The operator of the social-networking site surged 11 percent yesterday, reversing a two-week slide amid a rout in technology stocks.
Tilly’s Inc. slumped 17 percent to $8.77 after giving a profit projection that missed estimates. The retailer forecast second-quarter profit of 3 cents to 7 cents a share, trailing the 13 cents analysts had projected.