NEW YORK (Reuters) - U.S. stocks rose on Tuesday as merger activity suggested the market could offer investors still more value even as the S&P 500 and Dow industrials hover near five-year highs.
Equities have resisted a pullback as investors use dips in stocks as buying opportunities. The S&P is up about 7 percent so far in 2013 and has climbed for the past seven weeks in its longest weekly winning streak since January 2011, though most of the weekly gains have been slim.
Office Depot Inc
OfficeMax jumped 20 percent to $12.94 while larger rival Staples Inc
More than $158 billion in deals has been announced thus far in 2013. Last week, agreements included the acquisition of H.J. Heinz Co
"Equity investors have to be encouraged by M&A since, if the number crunchers are offering large premiums, that shows how much value is still in the market," said Mike Gibbs, co-head of the equity advisory group at Raymond James in Memphis, Tennessee.
The Dow Jones industrial average <.dji> was up 37.81 points, or 0.27 percent, at 14,019.57. The Standard & Poor's 500 Index <.spx> was up 6.84 points, or 0.45 percent, at 1,526.63. The Nasdaq Composite Index <.ixic> was up 9.39 points, or 0.29 percent, at 3,201.42.
U.S. markets were closed on Monday for the Presidents Day holiday.
Health insurance stocks tumbled, led by a 7 percent drop in Humana Inc
UnitedHealth Group
Express Scripts
Wall Street's strong start to the year for was fueled by stronger-than-expected corporate earnings, as well as a compromise by legislators in Washington that temporarily averted automatic spending cuts and tax hikes that are predicted to damage the economy.
The compromise on across-the-board spending cuts postponed the matter until March 1, at which point the cuts take effect. Ahead of the debate over the cuts, known as sequestration, further gains for stocks may be difficult to come by.
"If there's no major contention with sequestration, it looks like stocks are prepared to handle it, but until then we'll probably stay in a consolidation period marked by sideways trading with a slow rate of ascent," said Gibbs.
Economic data showed the NAHB/Wells Fargo Housing Market index unexpectedly edged down to 46 in February from 47 in the prior month as builders faced higher material costs.
According to the Thomson Reuters data through Monday morning, of the 391 companies in the S&P 500 that have reported results, 70.1 percent have exceeded analysts' expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters.
Fourth-quarter earnings for S&P 500 companies have risen 5.6 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.
(Additional reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama, Kenneth Barry and Nick Zieminski)
M&A deals lift shares, suggest more value in market
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M&A deals lift shares, suggest more value in market
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