Category: Markets / Finance / February 19, 2013 11:51 AM EST
U.S. stocks advanced on Tuesday (February 19) after the long holiday weekend and a seven-week winning streak for the S&P 500 as merger activity buoyed investor optimism, but health insurer shares muted gains.
The rise in share prices lifted the blue-chip Dow Jones Industrial average to five-year highs, with the index hitting the 14,041 level approximately 30 minutes into the day's trade. At that level the Dow is just 157 points shy of its all-time of 14,198 achieved in October of 2007.
Office Depot Inc surged 21.6 percent to $5.58 (USD) after a person familiar with the matter said the No. 2 U.S. office supply retailer is in advanced talks to merge with smaller rival OfficeMax Inc. A deal could come as early as this week.
OfficeMax shares jumped 28.8 percent to $13.85 while larger rival Staples Inc shot up 15.1 percent to $14.91 as the best performer on the S&P 500.
The Dow Jones industrial average rose 59.94 points or 0.43 percent, to 14,041.7, the S&P 500 gained 6.62 points or 0.44 percent, to 1,526.41 and the Nasdaq Composite added 12.01 points or 0.38 percent, to 3,204.04.
U.S. markets were closed on Monday for the Presidents Day holiday.
Health insurer stocks tumbled, led lower by a 9 percent drop in Humana Inc to $70.98 after the company said the government's proposed 2014 payment rates for Medicare Advantage participants were lower than expected and would hurt its profit outlook.
UnitedHealth Group lost 2.9 percent to $55.68 as the biggest drag on the Dow. The Morgan Stanley healthcare payor index dropped 2.8 percent.
The benchmark S&P index is up 7 percent for the year and is coming off its longest weekly winning streak since January 2011.
The strong start was fueled by legislators in Washington temporarily averting automatic spending cuts and tax hikes as well as by stronger-than-expected earnings and economic data. The Federal Reserve's stimulus policy has also been a major factor.
But further gains for the S&P 500 have been a struggle as investors look for new catalysts to lift the index, which hovers near five-year highs.
The compromise by lawmakers on across-the-board spending cuts, known as sequestration, only postponed the matter, and Democrats and Republicans have until March 1 to resolve differences or the cuts, which are predicted to damage the economy, will take effect.
The uptick in merger and acquisition activity, a sign of optimism about the outlook on Wall Street, has resulted in more than $158 billion in deals announced so far in 2013.
Last week, deals were reached for the acquisition of H.J. Heinz Co by Berkshire Hathaway and the sale by General Electric of its remaining stake in NBCUniversal to Comcast Corp CMC.
(Video Source: Reuters)