U.S. Stocks Rise, Led by Real-Estate Trusts, on Takeovers
Real-estate shares surged on the $13.5 billion takeover of Archstone-Smith Trust, propelling U.S. stocks to their second straight advance and the Standard & Poor’s 500 Index to within 10 points of a record.
Property companies accounted for seven of the 10 top gains in the S&P 500, led by Archstone-Smith Trust, the second-largest U.S. apartment real-estate investment trust. Avaya Inc., the world’s biggest maker of corporate telephone equipment, climbed the most in almost two years on a report it may be acquired.
More than $1 trillion in buyouts is driving the U.S. stock market’s best first-half rally since 2003. Members of the S&P 500 are trading at 17.9 times earnings, about half the price-to- earnings valuation when the index climbed to its March 2000 record.
“The market still is trading at fairly attractive valuation levels,'’ said Michelle Clayman, who oversees $6.2 billion as chief investment officer at New Amsterdam Partners in New York. “It’s supported by deals and underlying fundamentals.'’
The S&P 500 increased 2.38, or 0.2 percent, to 1518.11. The index set a record close of 1527.46 in March 2000. The Dow Jones Industrial Average added 14.06, or 0.1 percent, to 13,521.34. The Nasdaq Composite Index climbed 14.87, or 0.6 percent, to 2572.06. U.S. exchanges were closed yesterday for the Memorial Day holiday.
Real-Estate Rally
Archstone-Smith surged $6.19, or 11 percent, to $61.42 for the second-steepest advance in the S&P 500. Tishman Speyer Properties LP, the New York-based real-estate investor, and Lehman Brothers Holdings Inc. agreed to buy Archstone for $60.75 a share, the companies said in a statement.
The total value of the transaction including debt is $22.2 billion, the companies said.
A gauge of real-estate companies in the S&P 500 rose 4.1 percent. Simon Property Group Inc. gained $3.52 to $105.40. Equity Residential jumped $3.20 to $50.75.
Avaya rose $2.09, or 15 percent, to $15.76, its biggest advance since July 2005. Silver Lake Partners is in talks about a buyout of the telephone-equipment maker, according to the Wall Street Journal.
The report heightened speculation Avaya may be close to a deal after the company last week postponed a meeting with analysts that had been set for May 31 and didn’t give a reason. Avaya spokesman Jim Finn and Matt Benson, spokesman for Silver Lake, declined to comment.
Confidence Rising
Stocks pared gains after the New York-based Conference Board’s index of consumer confidence rose to 108 this month from 104 in April. Economists in a Bloomberg survey expected a reading of 105. Some investors said the report reinforced concerns inflation could accelerate and cause the Federal Reserve to raise borrowing costs.
“There is a nontrivial possibility that the next move by the Fed'’ will be to increase interest rates, said New York-based Abhijit Chakrabortti, head of global equity strategy at JPMorgan. “The big risk to equities is not growth risk. It is really inflation risk.'’
Investors will get more clues about the outlook for interest rates tomorrow when the Fed releases the minutes from its May 9 meeting.
Shares of CDW Corp. added $7.55 to $83.11. The supplier of computers and software to businesses and governments may be bought by a private-equity firm, the Journal reported, citing two people familiar with the matter.
Madison Dearborn Partners LLC is thought to be the leading contender to buy CDW, which has a market value of about $6 billion, the newspaper said. Calls to CDW spokesmen Gary Ross and Clark Walter weren’t returned. John Canning, chairman of Madison Dearborn, wasn’t available for comment.
Other Takeovers
URS Corp. added $2.38 to $49.27. The design-and-engineering company agreed to buy rival Washington Group International Inc. for about $2.6 billion to expand its business managing nuclear- power and infrastructure projects. Washington Group jumped $15.07 to $85.04.
Alcoa Inc., which made an unsolicited $27.7 billion takeover offer for Alcan Inc. on May 7, fell 53 cents to $40.37.
Europe’s Norsk Hydro ASA and Rio Tinto Group may bid for Alcan, according to newspaper reports, raising expectations of a bidding war with Alcoa.
Norsk Hydro is preparing a bid valued at more than $30 billion for Alcan, the Globe and Mail reported, citing bankers close to both companies who weren’t named. Rio Tinto, the world’s third-largest miner, hired Deutsche Bank AG to advise it on a possible Alcan bid, the Age newspaper reported, without citing anyone. Shares of Alcan added $1 to $86.
Also fueling takeover speculation, Royal Bank of Scotland Group Plc, Santander Central Hispano SA and Fortis offered 71.1 billion euros ($95.6 billion) for ABN Amro Holding NV, trumping Barclays Plc in the largest banking takeover.
Crude-Oil Selloff
Energy producers fell after crude oil plunged $2.05 to $63.15 a barrel in New York on signs that U.S. gasoline supplies will be adequate to meet summer demand and after Nigerian oil workers ended a strike.
Exxon Mobil Corp., the world’s largest publicly traded oil company, fell 89 cents to $82.62, leading energy producers to a 0.9 percent drop, the steepest retreat among 10 industry groups in the S&P 500.
The gain in stocks was also buffeted after the official Xinhua News Agency said China’s government tripled the stamp tax on securities trades to 0.3 percent from 0.1 percent, effective May 30. The Bank of New York China ADR index fell 1 percent.
Bausch & Lomb, Advanced Medical
Bausch & Lomb Inc. slumped $2.59, or 3.7 percent, to $67.90, the steepest decline in the S&P 500. Rival eye-care company Advanced Medical Optics Inc. recalled a contact lens solution linked to a cause of blindness and withdrew its earnings forecast, jeopardizing its plans to enter a bidding war for Bausch & Lomb, analysts said. Advanced Medical fell $5.51, or 14 percent, to $34.69.
Some homebuilders fell after a report showed home prices in the U.S. dropped last quarter for the first time in almost 16 years, as 13 out of 20 cities reported declines in March.
The value of a house dropped 1.4 percent in the first three months of the year from the same period in 2006, according to a report today by S&P/Case-Shiller.
D.R. Horton Inc., the second-largest U.S. homebuilder, fell 10 cents to $23.43. NVR Inc., the seventh biggest, slid $7 to $803.
The Russell 2000 Index, a benchmark for companies with a median market value of $678 million, gained 0.9 percent to 837.53. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 0.3 percent to 15,315.66. Based on its advance, the value of stocks increased by $58.1 billion.
To contact the reporter on this story: Eric Martin in New York at .
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