Wall Street holds slight gain

Associated Press

April 28, 2008 03:17 pm

— Wall Street held on to a slight advance Monday as investors appeared unenthusiastic about acquisition news and were cautious ahead of this week's earnings reports and Federal Reserve policy meeting.

Stocks fluctuated most of the morning before turning higher in a session that marked one of the most active days for acquisitions in almost three months. The biggest deal was the Warren Buffett and candy maker Mars Inc. offer to buy Wm. Wrigley Jr. Co. for about $23 billion in cash. Meanwhile, billionaire Kirk Kerkorian plans to make an offer that would expand his stake in Ford Motor Co. to 5.6 percent, saying he sees signs the automaker's turnaround plan is working.

This helped to offset disappointment in the market that struggling Continental Airlines Inc. said it would not pursue a combination with another carrier right away. It was a surprising move after weeks of speculation it would join with United Airlines to create the world's biggest carrier.

Wall Street positioned itself ahead of the Fed's policy-setting meeting on Tuesday and Wednesday. The central bank is widely tipped to cut interest rates by a quarter point, then leave them steady for the balance of the year to help ward off inflation.

"Investors are holding their breath for the Fed, and not even these high-profile deals are shaking people off of their hands," said Jack A. Ablin, chief investment officer at Harris Private Bank. "The direction of Fed policy hangs in the balance, and there are people like me that hope the central bank quits sooner rather then later."

In midafternoon trading, the Dow Jones industrial average rose 39.74, or 0.31 percent, to 12,931.60.

Broader indexes were also higher. The Standard & Poor's 500 index rose 3.80, or 0.27 percent, to 1,401.64, and the Nasdaq composite index rose 11.93, or 0.49 percent, to 2,434.86.

Bond prices edged higher after suffering big losses last week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.84 percent from 3.87 percent late Friday.

Crude oil spiked to near $120 a barrel in overnight trading amid supply concerns, then gave up some gains to trade 49 cents higher at $119.02 in afternoon trading on the New York Mercantile Exchange.

The dollar was mixed against other major currencies, while gold prices were higher.

In corporate news, Kerkorian's investment company, Tracinda Corp., said it plans to offer $8.50 per share in cash for up to 20 million additional shares of Ford. Ford shares rose 90 cents, or 11.9 percent, to $8.40.

Continental Airlines shares fell 49 cents, or 2.9 percent, to $16.73 after the airline announced it wasn't interested in completing a deal. The decision stunned United's parent, UAL Corp., which had been in advanced talks with Continental and expected to complete a deal by early May.

United shares fell 92 cents, or 6.1 percent, to $14.29.

The deals were encouraging signs that companies are still willing to make mergers and acquisitions happen � and that many might do so while valuations still look cheap.

"What is happening is that people are thinking the Fed is keeping the economy going, and this is a good opportunity to do some inexpensive shopping," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "There has been a bit of a concern over the past few months that we haven't been seeing enough M&A."

Investors also turned their attention to a handful of earnings reports released on Monday. The biggest will come after the closing bell when Visa Inc. posts its second-quarter results, which are expected to beat expectations due to faster growth overseas.

Health insurer Humana said Monday that increased Medicare Advantage membership helped drive first-quarter profit above Wall Street expectations, as it raised its outlook for the full year. Shares rose 28 cents to $45.16.

The Russell 2000 index of smaller companies rose 3.90, or 0.54 percent, to 725.78.

Advancing issued outpaced decliners by a 3-to-2 margin on the New York Stock Exchange, where volume came to 584.3 million shares.

Overseas, Japan's Nikkei stock average rose 0.22 percent. In afternoon trading, Britain's FTSE 100 fell 0.02 percent, Germany's DAX index added 0.42 percent, and France's CAC-40 rose 0.69 percent.