Most U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a second day, as optimism about takeovers outweighed a drop in technology shares following a report showing lower chip sales.
Freeport-McMoRan Copper & Gold Inc. (FCX) rose 1.3 percent after Minmetals Resources Ltd. (1208) offered to buy Perth-based Equinox Minerals Ltd. for about $6.5 billion. Molycorp Inc. (MCP) jumped 12 percent as the owner of the largest rare-earth deposit outside China bought most of a European producer. Hewlett-Packard Co. (HPQ) and Intel Corp. (INTC)retreated more than 1.1 percent after the Semiconductor Industry Association said global three-month average chip sales dropped 1.1 percent.
More than five stocks rose for every four that fell on U.S. exchanges at 4 p.m. in New York. The S&P 500 advanced less than 0.1 percent to 1,332.87. The Dow Jones Industrial Averageadded 23.31 points, or 0.2 percent, to 12,400.03 today.
“M&A activity has been reasonably strong,” said Peter Jankovskis, who helps manage about $2.7 billion at Oakbrook Investments in Lisle, Illinois. “People look at that as a sign of confidence. It’s an indication that stocks are undervalued. In addition, the U.S. economy is on fairly strong footing. That all provides support for the stock market.”
Global Deals
The S&P 500 has risen 6 percent in 2011 as government stimulus measures, higher-than-estimated earnings and corporate takeovers boosted investors’ optimism. There have been 6,241 deals announced globally this year, totaling $642.6 billion, a 27 percent increase from the $506.5 billion in the same period in 2010, according to data compiled by Bloomberg.
The index had fallen as much as 6.4 percent from this year’s high on Feb. 18 as concern grew about Japan’s nuclear crisis and uprisings in the Middle East and northern Africa.
A gauge of raw-materials companies rallied 0.7 percent today, the most in the S&P 500 within 10 industries. Freeport- McMoRan, the world’s largest publicly traded copper producer, gained 1.3 percent to $55.77.
Minmetals, the Hong Kong unit of China’s biggest metals trader, made an unsolicited offer of about C$6.3 billion ($6.5 billion) in cash for Equinox Minerals Ltd., to gain control of Africa’s largest copper mine. Minmetals bid C$7 a share, 23 percent more than Perth-based Equinox’s closing price in Toronto on April 1, the Hong Kong-based company said.
Molycorp Soars
Molycorp jumped 12 percent to $66.41. The owner of the largest rare-earth deposit outside China acquired 90 percent of Estonia-based AS Silmet for about $89 million in cash and stock to double its processing capacity and expand into Europe.
Pfizer Inc. (PFE) increased 0.8 percent to $20.54. The world’s biggest drugmaker agreed to sell its Capsugel manufacturing unit to KKR & Co. for $2.38 billion in an effort to focus on its higher-profit business developing new medicines.
Epicor Software Corp. (EPIC) jumped 12 percent to $12.56, the highest price since February 2008. The supplier of business programs said it agreed to be acquired by funds advised by Apax Partners for $12.50 a share in cash.
“CEOS are spending money, they’re buying back their stock, they’re investing for the future through capex and M&A,” said Jonathan Golub, chief U.S. equity strategist at UBS AG. “We’re at all-time record cash. Companies are returning boatloads not only through M&A, buybacks are back in an enormous way. We’re probably half way through that cycle.”
Ford Motor Co. (F) gained 2.6 percent to $15.55. The automaker rose was raised to “neutral” from “underperform” at Credit Suisse Group AG, which said first-quarter earnings could lift stock prices. Ford is estimated to release results on April 27.
Technology Shares Slump
A gauge of technology companies dropped 0.5 percent, the biggest decline in the S&P 500 within 10 industries. The three- month average for global chip sales was $25.5 billion in February, down 1.1 percent from the prior month, the Semiconductor Industry Association said.
Intel, the world’s largest chipmaker, fell 1.2 percent to $19.49. Hewlett-Packard, the biggest computer maker, slumped 1.6 percent to $40.34. Nvidia Corp. (NVDA), a maker of graphics chips, slumped 3.6 percent to $17.55.
Chipmakers rallied after the 4 p.m. close of U.S. exchanges as Texas Instruments Inc. (TXN), the second-largest U.S. chipmaker, agreed to buy National Semiconductor Corp. (NSM) for about $6.5 billion, its biggest acquisition as it expands its leadership in analog semiconductors.
The Semiconductor HOLDRs Trust (SMH), an exchange-traded fund, gained 3 percent to $34.82 at 5:14 p.m. National Semiconductor surged 72 percent to $24.27. Texas Instruments declined 2.1 percent to $33.41.
No Time to Sell
The biggest increase in profits in more than a century is telling investors that this is no time to sell stocks, even after the S&P 500 almost doubled from its March 2009 low.
S&P 500 earnings are poised to surpass the 2007 peak of $90 a share in the third quarter after surging from $7 in March 2009, the quickest recovery since at least 1900, according to data from S&P and Yale University’s Robert Shiller compiled by Bloomberg. The gap between projected 12-month profits and average earnings over the last 10 years is set to widen the most since 1951, the data show.
“People are more comfortable with the recovery than at any time over the last couple of years,” said Doug Ramsey, the Minneapolis-based director of research at Leuthold Group, which oversees $3.9 billion and recommended buying equities four days before the bull market started. “That’s typically when retail investors regain courage,” and may spur a rise of up to 25 percent in the S&P 500 during the next 18 months, he said.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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