Dec 11, 2006 1:40 pm US/Central
Stocks Rise In Advance Of Fed Meeting
NEW YORK (AP) ―
Wall Street extended its advance Monday as investors weighed several takeover developments and placed bets ahead of the Federal Reserve's decision on interest rates.
A series of recent acquisition announcements has reassured investors that corporations still feel the economy is robust enough to strike deals. There was about $45.4 billion worth of acquisitions announced by Standard & Poor's 500 companies last week, setting up this year to be the best for M&A since 2000.
Driving the Dow Jones industrials was American International Group Inc., which agreed to buy the U.S. port operations from state-owned Dubai Ports World. Hedge fund SAC Capital Advisors LLC bought a stake in miner Phelps Dodge Corp., and said it would oppose the company's planned takeover by Freeport-McMoRan Copper & Gold Inc.
Speculation about pending deals also helped the market. Medical device maker Biomet Inc. and travel reservation company Sabre Holdings Corp. rose on reports they might be acquisition targets.
However, light volume on Monday indicated investors were a bit more cautious as they adjusted their positions before the Fed's meeting Tuesday. The central bank raised rates 17 straight times starting in June 2004, then left them unchanged at its last three meetings.
In early afternoon trading, the Dow Jones industrial average rose 16.26, or 0.13 percent, to 12,323.75.
Broader stock indicators were narrowly higher. The S&P 500 index rose 2.87, or 0.20 percent, to 1,412.71, and the Nasdaq composite index was up 8.40, or 0.34 percent, at 2,445.76.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.52 percent from 4.55 percent late Friday. The dollar was mixed against other major currencies, while gold prices moved higher.
The price of light sweet crude fell 7 cents to $61.96 on the New York Mercantile Exchange.
Stocks bounced around in morning trading as investors began to place bets of what will come out of the Fed meeting. Policymakers have been trying to engineer an economic soft landing, carefully moderating growth without pushing the economy into a recession.
However, the volatility might not entirely be because of investors guessing which direction the Fed might take.
"It will be all about the Fed's language, and that might be causing some intraday volatility as people set up their play ahead of the decision," said Brian Williamson, an equity trader at The Boston Company Asset Management. "But, that's not all of it. What's happening is that as the market creeps toward a year high you see some investors exiting their positions."
Phelps Dodge shares fell 42 cents to $123.25 after SAC Capital Partners, which is led by financier Steven A. Cohen, made a bid for the Phoenix-based miner. Last month, Freeport-McMoRan said it planned to buy Phelps Dodge.
AIG rose 84 cents to $71.19 after the United Arab Emirates sold off its U.S. ports to the insurance company. Terms of the deal were not disclosed.
Biomet rose $1.71, or 4.3 percent, to $41.50 on a report that U.K.-based Smith & Nephew PLC might bid $11 billion to acquire the medical device maker. There was also speculation that a competing offer might be made by Johnson and Johnson, whose shares shed 38 cents to $65.57.
Sabre, which operates the Travelocity Web site, rose $2.16 to $30.48 on reports it has been in talks with private equity firms about a possible buyout.
Time Warner Inc. hit multiyear highs after it was upgraded by Prudential Securities, which said the stock could advance due to strong potential for improvement at the media conglomerate's cable division. Shares rose 27 cents to $21.18, surpassing its 52-week high of $20.95.
Harrah's Entertainment Inc. rose 33 cents to $79.92 on a report the casino operator's board will meet Wednesday to consider several buyout offers. Private equity firms Apollo Management and Texas Pacific Group have joined together to offer $81 per share, and Penn National Gaming Inc. and hedge fund D.E. Shaw are also said to be considering an offer.
The Russell 2000 index of smaller companies was up 0.52, or 0.07 percent, at 793.08.
Advaning issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 711 million shares.
Overseas, Japan's Nikkei stock average closed up 0.67 percent. In afternoon trading, Britain's FTSE 100 was up 0.12 percent, Germany's DAX index rose 0.65 percent, and France's CAC-40 added 0.81 percent.
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