Surging oil prices left stocks little changed Monday, as interest rate worries also diluted Wall Street’s enthusiasm over multibillion-dollar acquisitions in the banking and newspaper sectors.
With no new economic reports from the government, investors turned their focus to the day’s two major deals: Capital One Financial Corp.’s $14.6 billion offer for North Fork Bancorp Inc. and McClatchy Co.’s $4.5 billion bid for newspaper publisher Knight Ridder Inc.
But continued nervousness about higher interest rates, oil and inflation limited Wall Street’s momentum, said Jeff Kleintop, chief investment strategist for PNC Financial Services Group. This week’s reports on consumer price increases and retail sales will feed speculation over whether the Federal Reserve might lift rates as many as three more times, he said.
“We’re certainly looking to see how core [consumer] prices come in,” Kleintop said. “If they continue to show a bit of upward pressure, that could push up rates and affect the market.”
The Dow Jones industrial average finished the day down 0.32 point, or basically flat, while the broader Standard & Poor’s 500-stock index was up 2.55 points, or 0.20 percent. The technology-rich Nasdaq composite index gained 4.99 points, or 0.22 percent, after losing 1.76 percent last week.
Bond prices extended last week’s decline, with the yield on the 10-year Treasury note edging up to 4.77 percent from 4.76 percent late Friday. The dollar lost ground against other major currencies, and gold prices also slipped.
Crude futures jumped as anxiety about political tension in major oil-producing nations offset reports of growing U.S. reserves.
Kleintop said the market appeared to have some momentum from last week’s jobs data and should react to a number of key reports scheduled for this week, including import and export prices, housing starts and consumer confidence. However, many traders are already looking ahead to the Fed’s March 28 meeting, when the central bank is expected to boost the federal funds rate a 16th consecutive time.
But while signs of economic strength — both in the United States and overseas — are reason for investors to anticipate higher interest rates, it’s too soon to tell if the central bank will lift rates above 5 percent, said Brian Gendreau, investment strategist at ING Investment Management.
“The Fed has said they’re going to be data dependent,” Gendreau said. “A lot is going to depend on what the world looks like at their June meeting. And June is a long ways off, so I think that’s a little premature.”
McClatchy, which is planning to sell about a third of Knight Ridder’s newspapers, is also assuming about $2 billion of the company’s debt as part of the agreement. McClatchy lost $1.51 to $51.55; Knight Ridder initially gained ground but ended down $1.08 at $63.92.
Credit card issuer Capital One agreed to buy North Fork in a stock-and-cash deal equal to a 23 percent premium to North Fork’s Friday closing price of $25.40. Capital One dropped $6.82 to $83.10, while North Fork added $3.80 to $29.20.
Watson Pharmaceuticals Inc. made a deal to buy rival Andrx Corp. for $1.9 billion in cash, creating the nation’s third-largest generic drugmaker. The $25-per-share offer is a 16 percent premium to Andrx’s closing price Friday. Watson fell 55 cents to $29, and Andrx surged $2.14 to $23.73.
Home mortgage lender Fannie Mae said it found additional errors during a government-ordered review of its accounting. The company said it has made substantial progress toward completing the review but expects to miss its filing deadline for the second straight year. Fannie Mae dropped 96 cents to $52.97.
Overseas, Japan’s Nikkei stock average gained 1.55 percent. Britain’s FTSE 100 jumped 0.76 percent, Germany’s DAX index added 0.87 percent and France’s CAC-40 was higher by 0.75 percent.