U.S. Stocks Little Changed; S&P 500 at Record Amid DealsCallie Bost
U.S. stocks were little changed, with the Standard & Poor’s Index 500 Index at an all-time high, as a slump in small-cap shares and concern over Japan’s recession offset corporate deals.
Allergan Inc. rose 5.3 percent after Actavis Plc agreed to pay about $66 billion for the maker of Botox. Baker Hughes Inc. jumped 8.9 percent after agreeing to sell itself to Halliburton Co. for $34.6 billion. DreamWorks Animation SKG Inc. slipped 14 percent after Hasbro Inc.’s approach to acquire the studio was said to have ended without agreement.
The S&P 500 rose 0.1 percent to 2,041.32 at 4 p.m. in New York after earlier losing 0.3 percent. The Dow Jones Industrial Average added 13.01 points, or 0.1 percent, to 17,647.75, five points below an all-time high. The Russell 2000 Index of smaller companies lost 0.8 percent for a third day of losses. About 5.7 billion shares changed hands on U.S. exchanges, 12 percent lower than the three-month average.
“I think the central theme for the day is overriding concern that global growth is continuing to decelerate,” Chad Morganlander, a money manager at St. Louis-based Stifel Nicolaus & Co., which oversees about $160 billion, said by phone. “There’s a hope that monetary policy will stay accommodative across the board, which has emboldened risk-taking.”
Japan unexpectedly sank into a recession last quarter as it struggled to cope with April’s sales-tax increase. The world’s third-largest economy shrank an annualized 1.6 percent, after a revised slump of 7.3 percent in the previous three months. That missed projections for a 2.2 percent gain in the third quarter.
In the U.S., industrial production dropped last month, weighed down by declines at utilities, mines and automakers that signal manufacturing started the fourth quarter on a soft footing. Separate data showed the Fed Bank of New York’s Empire Index increased less than forecast in November.
A pickup in manufacturing is needed to help bolster the expansion, now in its sixth year, as global growth from Europe and Japan to emerging markets cools. Rising consumer confidence and the drop in gasoline prices are brightening the outlook for holiday sales, indicating factories will get a lift in the next few months.
Mario Draghi presented European lawmakers with a list of policy resolutions for 2015, and said an expanded purchase program to help stimulate the economy could include government bonds. The European Central Bank president used his final quarterly testimony of 2014 to the European Parliament to call for political action that complements monetary policy, insisting his institution alone can’t fix the region’s economy.
JPMorgan Chase & Co. told investors to dump U.S. equities in favor of their European counterparts. The brokerage cut its rating on U.S. stocks to underweight, similar to a sell recommendation, from the equivalent of buy, while reversing the call for euro-area equities.
As enthusiasm for European stocks faded since the beginning of 2014, when bulls united in favoring the region, the lag versus the U.S. has now made them too cheap to ignore, according to JPMorgan strategists led by Mislav Matejka.
The S&P 500 climbed 0.4 percent last week, taking its rebound from a six-month low in October to 9.5 percent. The gauge has rallied to all-time highs as better-than-expected earnings and economic data have shored up confidence that the U.S. economy is able to weather a global slowdown even as the Fed winds down its bond-buying program.
The benchmark index has closed the past five days with a move of less than 0.1 percent in either direction, the longest such stretch since 1969.
The Chicago Board Options Exchange Volatility Index jumped 5.1 percent to 13.99. The gauge of S&P 500 derivatives prices rose 1.5 percent last week.
Urban Outfitters Inc. and Agilent Technologies Inc. are among companies posting results today. Of the S&P 500 members that have reported this earnings season, 80 percent beat profit estimates and 60 percent surpassed revenue projections, according to data compiled by Bloomberg.
Four out of 10 industries in the S&P 500 Index climbed today, with utility, health-care and consumer-staples companies leading gains.
West Texas Intermediate and Brent crude oil dropped after Japan, the world’s third-largest oil consuming country, slipped into a recession.
Energy companies in the S&P 500 have tumbled 15 percent from a June peak as leading OPEC members resisted calls to cut crude output and instead reduced some export prices while U.S. production climbed to the highest level in more than three decades. The Russell 2000’s index of energy producers sank 2.6 percent today.
Baker Hughes, the third-biggest oil-field service company, jumped 8.9 percent to $65.23, while Halliburton, the second largest, slid 11 percent to $49.23. Halliburton will pay about $78.62 a share in cash and stock for Baker Hughes, the companies announced today.
DreamWorks dropped 14 percent to $22.31. Hasbro’s talks to acquire the studio that produced the “Shrek” films never advanced beyond a preliminary stage and a first meeting, according to a person with knowledge of the situation, who sought anonymity because the matter is private. Hasbro rose 4.4 percent to $56.37.
Actavis climbed 1.7 percent to $247.94 and Allergan rallied 5.3 percent to $209.20. The deal creates a new top 10 drugmaker and ends Valeant Pharmaceuticals International Inc.’s attempt at a hostile takeover of the maker of Botox.
Valeant increased 1.9 percent to $136.73. The company won’t try and top Actavis’s offer, it said in a statement. Valeant had waged a months-long takeover attempt with the backing of Pershing Square Capital Management LP, run by activist investor Bill Ackman.
Tyson Foods Inc. added 5.8 percent to $43.03. The company reported fourth-quarter earnings above analysts’ forecasts.