MENAFN - ProactiveInvestors - Australia
Dow Jones continues rally as Office Depot and OfficeMax advance merger talks
(MENAFN - ProactiveInvestors - Australia) U.S. stocks continued their recent strong run overnight on hopes for more M&A activity, despite a lack of progress on negotiations regarding the sequester and a decline in February's National Association of Homebuilders Index.
The sequester refers to the estimated 85 billion in spending cuts set to take effect March 1 unless there is a compromise between Democrats and Republicans.
This morning, President Barack Obama repeated his stance that a mix of spending cuts and tax increases is the best way to replace the sequester, but House Speaker John Boehner shot the tax increases down, and said the president's plan can't pass Congress.
By the close of trade, the Dow Jones had rallied 54 points to 14,036, while the NASDAQ jumped 22 points to 3214.
Meanwhile, former Clinton White House chief of staff Erskine Bowles and former Wyoming GOP Sen Alan Simpson Tuesday released a plan to cut the deficit by 2.4 trillion over the next 10 years, including a 600 billion cut from Medicare and Medicaid, a curb in tax breaks, and cutting discretionary spending by 1.2 trillion. Obama held a televised news conference to speak out against the plan.
Markets were supported by the pickup in merger activity of late, with two billion dollar deals announced last week, and reports Monday by the Wall Street Journal that Office Depot (NYSE:ODP) and OfficeMax (NYSE:OMX) are in advanced merger discussions, with a deal potentially to be announced as early as this week.
Both companies' shares surged, with OfficeMax lately up over 21%, and Office Depot higher by 10%. Staples' (NASDAQ:SPLS) shares rallied more than 12% on the talks.
Gains were also driven by positive sentiment from Europe, where markets rose sharply today after the German ZEW economic expectations index rose more than expected in February, reaching its highest level since April 2010.
Trader reaction was muted to the National Association of Homebuilders February index, which fell to 46 in February from 47 in January - down for the first time in 10 months. Economists expected the index to rise to 49.
In the week ahead, January housing starts will be revealed Wednesday, along with producer prices and the minutes of the Federal Reserve's latest policy meeting. Thursday, traders will see the latest Consumer Price Index and weekly jobless claims data.
In corporate news in the U.S., Google (NASDAQ:GOOG) shares rose to pass 800 for the first time in the company's history, lately trading up more than 1.5% to 804.78, with gains driven by reports the search engine giant is looking into launching retail stores to sell its branded products.
In other tech news, shares of Apple (NASDAQ:AAPL) edged down after Reuters reported that the company's computers were hit by a hacking attempt, but that no personal data was stolen.
Sony's (NYSE:SNE) shares rose almost 2% in the U.S., as the company is expected to unveil what is believed to be the PlayStation 4 console at an event in New York City on Wednesday evening.
In earnings reports, Medtronic (NYSE:MDT) shares fell after the medical tech company said fiscal third quarter earnings rose 5.7% on stronger revenue.
Express Scripts (NASDAQ:ESRX) shares rose more than 2.2%, a day after reporting fourth quarter earnings rose 74% on sharply higher revenue.
After the closing bell, Herbalife (NYSE:HLF) will grab headlines again as it reports fourth quarter results, with analysts expecting a profit of 1.03 per share on revenue of 1.05 billion. The nutritional products maker has been the subject of a very public dispute between hedge fund manager Bill Ackman and Carl Icahn. Ackman has alleged the company is running a pyramid scheme, while Icahn insists Herbalife has a reputable business model is considered "a great" buyout target.
Computer maker Dell (NASDAQ:DELL) is also slated to hand in results after the closing bell, with analysts expecting a profit of 39 cents a share.
Elsewhere, Humana (NYSE:HUM) shares fell more than 6%, leading shares of other health care insurers down as the Centers for Medicare and Medicaid Services proposed a decline in 2014 rates for Medicare Advantage, which was lower than the company had expected. Humana said it expects the decline to bite into its forecast profit.
Gold futures dropped Thursday again as gains in U.S. equities drew investor support away from the metal's safe haven appeal. April gold fell 5.30, or 0.3%, to settle at 1,604.20 an ounce on the Comex division of the New York Mercantile Exchange, the lowest close for a most-active contract since mid August of last year.
Meanwhile, oil for March traded in a tight range on Tuesday, but ended higher, drawing some support from German data. March oil rose 80 cents to end at 96.66 a barrel on the New York Mercantile Exchange.
European markets finished broadly higher today with shares in France leading the region. The CAC 40 rose 1.88% while Germany's DAX gained 1.62% and Britain's FTSE 100 rose 0.96%.
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