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U.S. Stocks Finish Week Little Changed; Phelps Dodge Advances
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By Michael Patterson(Bloomberg)
Nov. 25 -- U.S. stocks were little changed in a holiday-shortened week as a burst of corporate takeovers failed to ease concerns that holiday sales may falter amid slowing economic growth.
Materials and real-estate companies advanced after Phelps Dodge Inc., the world's third-biggest copper producer, and Equity Office Properties Trust, the largest U.S. office landlord, were acquired. Retailers declined as a drop in home prices and rising fuel costs sparked concern that consumers will have less money to spend during the holiday shopping season.
``Investors are trying to sort out whether the economy's going to slide into a recession with the hard landing that everyone worries about,'' said Tom Laming, who oversees $400 million as president and chief investment officer of Trendstar Advisors LLC in Overland Park, Kansas. ``Private equity is probably helping returns for certain stocks and certain sectors'' that are being eyed for mergers and acquisitions, he said.
The Standard & Poor's 500 Index ended the week down less than 1 percent at 1400.95, snapping a two-week winning streak. General Motors Corp. dragged down the Dow Jones Industrial Average after billionaire investor Kirk Kerkorian reduced his stake in the world's largest automaker. The 30-stock gauge fell 0.5 percent to 12,280.17, its first weekly decline since Nov. 3.
Gains in Dell Inc. helped lift the Nasdaq Composite Index to its third straight weekly advance. The Nasdaq, which gets two- fifths of its value from computer-related shares, rose 0.6 percent to 2460.26.
Trading slowed as investors took off early for the Thanksgiving holiday. The stock market was closed on Nov. 23 and shut three hours early yesterday.
Takeovers
Takeovers helped spur gains in materials and real estate companies this week.
Phelps Dodge surged 29 percent to $122.37 after Freeport- McMoRan Copper & Gold Inc. agreed on Nov. 19 to buy the copper producer for $25.9 billion in cash and stock in the world's biggest mining takeover. Phelps Dodge stockholders will get $88 in cash and 0.67 share of Freeport.
The deal values Phelps Dodge at $126.46 a share, or 33 percent more than its closing price Nov. 17.
Freeport, which fell the day after announcing the purchase, recouped its loss to finish the week up 7.8 percent at $61.86 on speculation the company may also be a takeover target.
Real-estate companies in the S&P 500 climbed 6.4 percent for the best performance among two dozen industry groups.
Shares of billionaire Sam Zell's Equity Office Properties Trust jumped 9.6 percent to $49. Blackstone Group LP, manager of the world's largest buyout fund, agreed to buy the top U.S. office landlord for about $20 billion in the biggest private- equity deal in history.
Other REITs
The deal helped lift other real estate investment trusts. Boston Properties Inc., the U.S. office-building owner founded by Mortimer Zuckerman, climbed 8.6 percent to $117.95. Vornado Realty Trust rallied 7.2 percent to $125.44.
In terms of M&A, ``there's plenty more in the pipeline,'' said Frank Aquila, a senior partner at New York-based law firm Sullivan & Cromwell LLP in New York. ``Looking at what I'm seeing just personally, the early part of next year is going to be very busy.''
The deals followed news of acquisitions last week in the media and airline industries. Companies have announced about $1.51 trillion of U.S. deals this year, according to data compiled by Bloomberg. Around the world, mergers and acquisitions rose to a record $3.1 trillion.
Retailers Drop
A gauge of retailers in the S&P 500 dropped 0.8 percent on concern higher oil prices and a slumping housing market may hold back consumers as the holiday shopping season kicks off. The dollar's drop to a 19-month low against the euro also hurt retailers because it boosts the cost of some imported goods.
Kohl's Corp., the fourth-largest U.S. department-store company, dropped 3 percent to $71.05. Target Corp., the second- biggest U.S. discount chain, slipped 0.9 percent to $57.71.
Home prices fell in about a third of U.S. metropolitan areas last quarter, the National Association of Realtors said on Nov. 20. Crude oil for January delivery increased 0.5 percent this week to $59.24 a barrel in New York.
Bed Bath & Beyond Inc., the largest U.S. home furnishings retailer, dropped 3.2 percent to $39.25. Staples Inc., the world's largest office-supplies retailer, lost 3.9 percent to $25.62.
GM had the steepest retreat in the Dow average, falling 12 percent to $31.23. Kerkorian's Tracinda Corp. cut its stake in the company to 42 million shares, or 7.4 percent. Tracinda had been GM's second-largest shareholder, with a 9.9 percent stake.
Dell Jumps
Dell jumped 9.2 percent to $27.33. The second-largest maker of personal computers, whose accounting is under investigation by regulators, said third-quarter net income was 30 cents a share, topping the 24-cent average estimate of analysts in a Thomson Financial survey.
Bear Stearns & Co. raised its rating on Dell to ``outperform'' from ``peer perform.'' Deutsche Bank AG increased its price estimate for the shares by 14 percent to $32. Credit Suisse Group and UBS AG also lifted their price estimates.
Medtronic Inc., the world's biggest maker of heart-rhythm devices, advanced 9.7 percent to $53.45. Fiscal second-quarter sales of the company's $30,000 implantable defibrillators increased 4 percent from a year earlier to $764 million, topping analysts' estimates.