By Wallace Witkowski and Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) -- U.S. stocks finished mostly
higher Thursday after another day of tight trading, but blue chips
turned in their second day of losses, as investors mulled mixed
economic data on a banner day for mergers and acquisitions.
While both the Nasdaq Composite Index and the S&P 500 Index
closed up fractionally at multiyear high levels, the Dow Jones
Industrial Average (DJI) fell 9.52 points, or less than 0.1%, to
close at 13,973.39. It's the second day of losses for the Dow since
it closed up above 14,000 on Tuesday. Shares of Coca-Cola Co. (KO)
declined 1%, and led 16 out of 30 Dow components lower.
Cisco Systems Inc. (CSCO) shares finished down 0.7%. Cisco late
Wednesday reported a small gain in earnings for its fiscal second
quarter.
The S&P 500 index (SPX) rose 1.05 points, or less than 0.1%,
to finish at 1,521.38, its highest close since Oct. 31, 2007.
Telecom stocks were the biggest decliner and energy led gains among
the benchmark's 10 major industries.
The Nasdaq Composite Index (RIXF) advanced 1.78 points, or less
than 0.1%, to close at 3,198.66, its highest close since Nov. 9,
2000.
On Thursday, the Dow industrials turned in a flat trading day,
only varying by 0.5%, following Wednesday's loss when the high-low
varied by only 0.6%. That's extending the Dow's flattest streak in
25 years.
For their own part, both the S&P 500 and the Nasdaq only
varied by about 0.6% Thursday.
Declining stocks and advancers were about even on the NYSE,
while advancers outpaced decliners by about 13 to 11 on the Nasdaq.
Composite volume for NYSE-listed stocks topped 3.7 billion shares,
while it surpassed 1.9 billion for Nasdaq-listed shares.
Fewer U.S. jobless claims counter sour European data
In economic news, U.S. jobless claims dropped by 27,000 to
341,000 in the week ended Feb. 9, according to the Labor
Department. Economists surveyed by MarketWatch expected a much
smaller drop.
"Overall the feel is that the labor market is improving as
evidenced by a dip in the number of insured claims amongst
claimants, which eased to 2.4% from 2.5%," said Andrew Wilkinson,
chief economic strategist at Miller Tabak, in emailed comments.
"This measure tracks the national rate of unemployment and portends
further declines ahead."
International economic news, however, was bleak. Gross domestic
product in the 17-nation euro-zone contracted by 0.6% compared with
the third quarter and fell 0.9% from the fourth quarter of 2011,
the European Union statistics agency, Eurostat, reported
Thursday.
And in Japan, real GDP shrank at an annualized rate of 0.4% in
the October-December quarter from the preceding three months, with
the result countering expectations for growth in GDP.
M&A splash highlights corporate cash piles, sidelined
money
Aside from economic data, a rash of deals announced over the
past 24 hours stole the spotlight.
H.J. Heinz Co. (HNZ), the food company known for its ketchup,
agreed to be acquired by Warren Buffett's Berkshire Hathaway Inc.
(BRKA) (BRK/A) and 3G Capital in a deal valued at $28 billion,
including debt. Heinz shareholders will receive $72.50 per share in
cash, a 20% premium to Heinz's closing price of $60.48 on
Wednesday. Shares of Heinz rallied 20%.
In the airline sector, the parent of American Airlines, AMR
Corp. (AAMRQ), and US Airways Group Inc. (LCC) confirmed plans to
merge and create the world's biggest air carrier. US Airways shares
declined nearly 5%.
In the consumer-staples sector, Constellation Brands Inc. (STZ)
shares surged more than 37%. Beer giant Anheuser-Busch InBev NV
(AHBIY) and Constellation said they've agreed on new terms for AB
InBev's full divestiture of the U.S. assets of Mexico's Grupo
Modelo SAB de CV.
The recent pop in mergers and acquisitions activity shows that
money on the sidelines is becoming more expensive, said Doug
Sandler, chief equity officer at Riverfront Investment Group.
"For retail investors, there's a real cost to having your money
on the sidelines," Sandler said. "Corporations are just saying: 'I
can't sit on this cash anymore.' Money sitting around doing nothing
subtracts return on equity."
Postrecession, it's no longer acceptable for a corporation to
have more than 10% of its value tied up in cash, Sandler said. This
much was evidenced by the suit brought against Apple Inc. (AAPL) by
activist investor David Einhorn.
That same M&A activity, however, may also be worrying
investors that markets are peaking, said John Canally, chief market
strategist at LPL Financial, who forecasts a "mini pullback" of
about 5% to 7% in the near future. That would follow a 6% run-up in
stocks in January alone.
"From a macro perspective, people are saying this rally's
getting tired and we're due," Canally said, noting that the market
is well past the average amount of trading days without a 10%
correction.
Trouble with sorting out automatic spending cuts due to take
effect soon may be the catalyst for a pullback, Canally said.
Unless Congress takes action, deep spending cuts in defense and
other important federal programs, which are known as the sequester,
will go into effect on March 1.
The sequester even has the big banks concerned with J.P. Morgan
Chase & Co. (JPM) cutting its GDP forecast on the chance that
the spending cuts will take place.
CenturyLink Inc. was the largest decliner in the S&P 500.
Its shares (CTL) dropped more than 22% after the landline provider
slashed its dividend and authorized a $2 billion stock buyback
plan. The moves triggered negative actions from rating
agencies.
Nick Beecroft, senior market analyst at Saxo Capital Markets,
said weak European growth was contributing to weaker sentiment and
the market was also a little unnerved by "brewing discontent about
currency wars."
The Wall Street Journal reported that George Soros and other
hedge-fund managers are making huge profits by betting on a weaker
yen.
The dollar index (DXY), which tracks the performance of the
greenback against a basket of other major currencies, rose to
80.387 from 80.091 late Wednesday. The euro (EURUSD) dropped to
$1.3352 from $1.3446.
Treasurys rose, with the yield on the 10-year note (10_YEAR)
down 6 basis points to 2.00%, following an auction of 30-year
bonds.
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