Dow edges closer to 14,000 amid merger talk

/ Source: The Associated Press

Blue chip stocks rose Monday as news of a potential big telecom deal involving Verizon pushed the Dow Jones industrials to a new record close and put the index closer to the 14,000 milestone.

The broader market was mixed as investors digested the market’s huge gains of last week.

The notion of a Verizon deal appeared to inject Wall Street with fresh optimism and helped stocks hang on to last week’s sizable gains because buyout activity has been a big driver for the stock market in the past year.

Although Vodafone Group PLC denied a report by the Financial Times that it is considering a  huge $160 billion bid for Verizon Communications Inc., investors appeared undeterred. The report cautioned that Vodafone has yet to approach Verizon; a deal could give Vodafone full ownership of Verizon Wireless, which Vodafone and Verizon now own jointly.

“I think just the idea of the number floated — $160 billion — gets the juices running in the market again even after this big move,” said Greg Church, chief investment officer of Church Capital Management in Yardley, Pa., referring to last week’s gains. “It would be the biggest deal ever. People want to be at the party and they don’t miss it.”

The Dow rose about 44 points or 0.3 percent, to 13,950.98 — its 30th record close of the year. The benchmark index hit an intraday high of 13,989.11, less than 11 points from 14,000.

Also helping the Dow, construction equipment maker Caterpillar Inc. hit a new high of $86.49, and closed at $85.90. United Technologies Inc., also a Dow component, hit a 52-week high of $76.98 before it closed at $76.67.

Broader stock indicators slipped a bit, and declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 1.37 billion shares.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 5.04 percent from 5.10 percent late Friday.

Oil futures rose 22 cents to $74.15 on the New York Mercantile Exchange. Oil hadn’t closed above that level since mid-August.

The dollar was mixed against other major currencies and continued to hover near its record lows against the euro. Gold prices fell.

Buyout news was responsible for moving a number of stocks Monday. Verizon rose $1, or 2.4 percent, to $42.76. Vodafone fell 37 cents to $33.15.

Restaurant chain operator IHOP Corp. said it would acquire Applebee’s International Inc. for about $1.9 billion. Applebee’s rose 53 cents, or 2.2 percent, to $24.91, while IHOP jumped $4.99, or 8.9 percent, to $61.24.

Con-way Inc. jumped $3.00, or 5.7 percent, to $56.06 after the trucking company agreed to acquire privately held carrier Contract Freighters Inc. for $750 million.

Church contends that if the number of deals slow markedly or if one unravels because of an inability to obtain financing, the overall stock market would likely pull back.

“As you keep racheting this up on more and more speculation at some point it does get a little frothy but we’re not there yet,” he said. “I think when this might pop is where one of these big deals can’t get financing. Then the game is done.”

Stocks showed little reaction to the New York Federal Reserve’s Empire State Manufacturing Survey that found regional manufacturing activity continued to improve in July.

Last week’s run-up came ahead of a flurry of quarterly results — 11 of the 30 companies that make up the Dow Jones industrials are due to report this week — and in advance of key readings on inflation.

Forecasts from companies should help indicate whether they can continue to put up solid profit growth as pricing pressures fluctuate, in part because of forces such as rising oil prices.

In other corporate news, McDonald’s rose 19 cents to $52.10 after predicting its second-quarter earnings before charges will top Wall Street’s forecasts.

Mattel rose 67 cents, or 2.5 percent, to $27.20 after reporting its second-quarter earnings rose 15 percent as increased sales global of its Barbie dolls and Hot Wheels toy cars made up for soft U.S. sales.

Ford Motor Co. fell 11 cents to $8.87 after denying reports that it is in talks to sell its Volvo division.