Stocks End Higher on Merger News
Stocks gained ground Thursday thanks to brisk merger activity, along with a report showing foreigners buying U.S. securities. A jump in wholesale inflation didn't hold down prices for long in early trading. And the market dipped in the early afternoon following comments from former Federal Reserve Chairman Alan Greenspan, who said he thinks the subprime loan problem could spread, but it hasn't hurt the consumer yet, but quickly recovered. Today's economic data is likely to keep the Federal Reserve on hold at next week's policy meeting, says Standard & Poor's Equity Research.
The Dow Jones industrial average rose 26.28 points, or 0.22%, to 12,159.68, boosted by strength in Alcoa (AA) and Citigroup (C). The broader Standard & Poor's 500 index gained 5.11 points, or 0.37%, to 1,392.28. The tech-heavy Nasdaq composite edged up 6.96 points, or 0.29%, to 2,378.7.
In economic news Thursday, the U.S. producer price index jumped 1.3% in February, sparked by higher energy prices, with the core up a hot 0.4%. Those follow a 0.6% decline in January, and a 0.1% increase in the core. On a year-over-year basis, the headline reading accelerated to a 2.5% pace from 0.2% previously. The core rate is now at a 1.8% rate, the same as in January. "The strength in these data will keep the FOMC on inflation watch next week," says Action Economics.
The March Empire State Manufacturing index plunged to 1.85 from 24 in February -- much weaker than expected. Another regional survey also was disappointing. The Philadelphia Fed Index fell to 0.2 in March, after dropping more than 7 points to 0.6 in February. The soft headline number was in contrast to expectations for an acceleration in growth as weather improved, says Action Economics. However, it notes that most of the components increased and suggested a healthier picture on the region's activity.
On the bright side, and foreign purchases of U.S. securities rose $74.6 billion in January, after a revised $14.7 billion decline in December. Total purchases of stocks and bonds rose $97.4 billion, after a $14.3 billion increase previously. Foreign purchases of Treasuries rose $15.3 billion. The rebound back near the monthly average of inflows suggests the decline in December was an aberration, says Action Economics, adding that foreign inflows of cash again more than covered the January $59 billion trade deficit.
U.S. jobless claims fell 12,000 to 318,000 in the week ended Mar. 10, following a 330,000 print the week before. This week's decline suggests the run up in February was more of a weather event, says Action Economics.
On Friday, investors will get even more economic news, including the consumer price index, real earnings, industrial production, and consumer sentiment.
In a speech Thursday at the Futures Industry Association annual meeting in Boca Raton (Fla.), Greenspan said the subprime problem "is not a small issue" and there is risk that it could spillover to other sectors. But he said he thinks there hasn't been much spillover yet to consumer behavior.
Merger news helped spark buying Thursday. InterContinental Exchange (ICE) made a bid for CBOT Holdings (BOT). ICE would issue 1.42 ICE shares for each BOT share, valued at $187.34 per BOT share based on yesterday's closing price of ICE shares.
Webex Communications (WEBX) agreed to be acquired by Cisco Systems (CSCO) for about $3.2 billion, or $57 per share in cash.
PHH Corp. (PHH) agreed to be acquired by GE Capital Solutions, the business-to-business leasing, financing, and asset management unit of 2 Next Page