Monday, April 28, 2008

Most U.S. Stocks Gain on Acquisitions; Wrigley, Ford Advance

By Eric Martin

April 28 (Bloomberg) -- Most U.S. stocks rose for a fourth day after billionaire Warren Buffett financed the $23 billion takeover of Wm. Wrigley Jr. Co. and investor Kirk Kerkorian bought a stake in Ford Motor Co.

Wrigley, the world's biggest maker of chewing gum, jumped the most since at least 1980 after Mars Inc., backed by Buffett, agreed to acquire the company for 28 percent more than its closing price last week. Ford rallied after Kerkorian said he bought 4.7 percent of the second-largest U.S. automaker and plans to buy more. Microsoft Corp. slumped for a second day, helping drag the Standard & Poor's 500 Index and Dow Jones Industrial Average lower, on speculation the world's largest software company will have to increase its bid to acquire Yahoo! Inc.

About five stocks gained for every four that fell on the New York Stock Exchange. The S&P 500 slipped 1.47 points, or 0.1 percent, to 1,396.37. The Dow decreased 20.11, or 0.2 percent, to 12,871.75. The Nasdaq Composite Index added 1.47, or 0.1 percent, to 2,424.4. The Russell 2000 Index, a measure of companies with a median market capitalization of $535 million, gained 0.5 percent for its fourth consecutive advance.

``These announcements are providing some support to the market and encouragement to investors that there are good underlying values behind stocks trading at discounts,'' said John Carey, who oversees $13 billion, including Wrigley shares, at Pioneer Investment Management in Boston. ``If you have the patience and the time to look at individual companies one by one, this is a great time to be investing.''

Earnings, Fed

The S&P 500 has climbed almost 10 percent since closing at a 19-month low March 10, helped by earnings from Google Inc., Intel Corp., Boeing Co. and American Express Co. Earnings have topped analysts' estimates at 69 percent of the 240 companies in the index that have reported fist-quarter results so far, according to data compiled by Bloomberg. Companies in the index trade for an average 15.1 times their estimated profit in the next 12 months, the lowest compared with historical earnings since 1990.

Traders increased bets the Federal Reserve will cut its benchmark interest rate at its meeting on April 30. They are now pricing in 80 percent odds of a reduction, up from 78 percent odds on April 25. The rest of the bets are for the central bank to maintain its target for overnight lending at 2.25 percent, according to Fed funds futures. The dollar was little changed against the euro amid speculation the Fed will signal it's close to finished cutting rates.

Wrigley rallied $14.46, or 23 percent, to $76.91, leading gains in companies that sell household goods. Mars agreed to purchase Wrigley with financing from Buffett's Berkshire Hathaway Inc. Mars will pay $80 a share in cash, 28 percent more than Wrigley's closing share price on April 25.

Ford, GM Climb

Ford climbed 71 cents, or 9.5 percent, to $8.21. Kerkorian, the billionaire investor who tried to overhaul General Motors Corp. three years ago, holds 100 million shares in Ford and seeks an additional 20 million, according to a statement.

GM had the steepest gain in the Dow average, rising 2.6 percent to $21.94.

``With a number of companies having their stocks being depressed in this environment, the strongest players are looking to take advantage of that, to come out of this downturn in a better strategic position than when they went in,'' Stefan Selig, the global head of mergers at Bank of America Corp., said in an interview with Bloomberg Television. ``There are a number of factors that will cause M&A activity to pick up.''

Some energy companies gained after oil rose to a record $119.93 a barrel in New York on the shutdown of a North Sea pipeline and as a strike and militant attacks reduced output from Nigeria.

ConocoPhillips, the third-largest U.S. oil company, climbed 87 cents to $84.44. Valero Energy Corp., the largest U.S. refiner, added $1.08, or 2.1 percent, to $52.93.

`Huge Risk'

There is a ``huge risk'' that oil prices will continue to rise until demand collapses because additional supplies are limited and alternative fuels are decades away from replacing crude, Deutsche Bank AG said.

Airlines climbed for a third day, led by US Airways Group Inc. The airline is in merger talks with UAL Corp.'s United Airlines after United was rejected as a suitor by Continental Airlines Inc., five people familiar with the discussions said.

A merger may help United stem two straight quarterly losses and compete against the combination of Delta Air Lines Inc. and Northwest Airlines Corp. United had to shift gears yesterday after Continental said it would stay independent.

US Airways surged $1.46, or 20 percent, to $8.62. AMR Corp., the parent of American Airlines, added 31 cents, or 4.2 percent, to $7.74. UAL dropped 40 cents, or 2.6 percent, to $14.81.

Visa Earnings

Visa Inc. added 53 cents to $75.63 in regular trading. The shares were rated ``overweight'' in new coverage at JPMorgan Chase & Co. and HSBC Holdings Plc, while UBS AG and Goldman Sachs Group Inc. placed ``buy'' recommendations on the stock. The company ``will enjoy above-average growth,'' JPMorgan analysts including Tien-tsin Huang wrote in a research note today.

Visa lost 3.9 percent to $72.71 in extended trading even after the company's earnings topped analysts' estimates. Second- quarter profit was 39 cents a share. Earnings excluding some items were 52 cents a share, beating the 45-cent estimate of analysts surveyed Bloomberg.

Verizon Communications Inc., the second-largest U.S. phone company, rose 2.5 percent to $37.95. First-quarter profit jumped 9.8 percent as mobile-phone customers spent more on text messages and wireless Internet browsing. Sales rose 5.5 percent to $23.8 billion, meeting the average estimate of analysts in a Bloomberg survey.

Sysco Corp., North America's largest distributor of food to restaurants, rose the most in more than six years in New York trading. Third-quarter profit increased 9 percent, beating analysts' estimates, after the company raised prices for customers including restaurants, hotels and schools. Sysco gained $2.38, or 8.5 percent, to $30.50.

`Further Rally'

Lehman Brothers Holdings Inc. strategist Ian Scott, who advised investors to buy global stocks before the past month's rebound, said better-than-expected earnings will pave the way for a bigger rally.

``The market was priced in for a substantial `miss,''' Scott, managing director for global equity strategy at Lehman, wrote in the note dated April 25. ``This has patently not happened. These first-quarter numbers ought to provide the fuel for a further rally in the market.''

Tenet, Clear Channel

Tenet Healthcare Corp. climbed for a second day, helping lead health-care companies higher. The hospital chain was raised to ``outperform'' on April 25 by Credit Suisse Group analyst Ken Weakley, who also boosted his target price to $8 from $6. Tenet gained 8.2 percent to $6.70.

Clear Channel Communications Inc. gained 34 cents to $30.04. A New York state judge dropped the largest U.S. radio broadcaster from a lawsuit filed by six banks that were sued for allegedly refusing to fund a $19.5 billion acquisition of the company by buyout firms Bain Capital LLC and Thomas H. Lee Partners LP.

Reports this week will probably show the U.S. lost jobs for a fourth month as the slump in construction and a slowdown in Consumer spending almost stalled growth, according to the average estimates of economists surveyed by Bloomberg.

``If we are in a recession, it is not a recession for all industries, and there remain opportunities to play on the pockets of our economy that are in this environment thriving,'' said Lawrence Creatura, who helps manage $2.6 billion at Clover Capital Management Inc. in Rochester, New York. ``The stock market has been quite strong recently. It remains at low valuations.''

Microsoft Slumps

Microsoft fell for a second day and posted the steepest decline in the Dow average, losing 2.8 percent to $28.99. Chief Executive Officer Steve Ballmer is weighing a fight to oust Yahoo's board and pave the way for a takeover, after the Internet company let his deadline pass without agreeing to a deal. Microsoft fell 6.2 percent on April 25 after saying sales slumped, casting doubt on whether PC demand can hold up in a slowing economy.

RadioShack Corp., the third-largest U.S. electronics retailer, fell the most in the S&P 500, losing 14 percent to $15.13. First-quarter profit declined 9.5 percent, more than analysts estimated, on slowing sales of wireless-telephone plans.

Medarex Inc. dropped 66 cents, or 8.2 percent, to $7.35. The co-developer of an experimental drug for skin cancer with Bristol-Myers Squibb Co. disclosed a delay in seeking U.S. approval for the treatment.

About 1.21 billion shares changed hands on the NYSE, 21 percent less than the three-month daily average. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, dropped 1.35 points to 14,087.86.

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