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Wall St. rises, buoyed by drug sector deal
2009-01-26
NEW YORK (Reuters) - Stocks rose in choppy trade on Monday, lifted by optimism over a $68 billion takeover in the drug industry that offset a grim warning about the year ahead from Caterpillar and worries over the state of the financial sector. A rare piece of good news for the recession-hit economy also helped sentiment, as sales of existing U.S. homes unexpectedly jumped 6.5 percent in December. The Dow Jones index of home builders' stocks (.DJUSHB) rose 2.7 percent. Pfizer Inc (PFE.N), the world's biggest drug maker, said it would buy rival Wyeth (WYE.N) for about $68 billion, suggesting that some companies are attractively valued after a dismal 2008. "We haven't seen any big deals in a while (so) it's an indication that there is potential for some deals to get done," said Kurt Brunner, portfolio manager at Swarthmore Group in Philadelphia. Caterpillar (CAT.N) was the Dow's top drag after the heavy equipment maker forecast its 2009 profit would drop significantly from 2008 and said it would cut nearly 20,000 jobs. Caterpillar shed 8.4 percent to $32.67. The Dow Jones industrial average (.DJI) rose 38.47 points, or 0.48 percent, to 8,116.03. The Standard & Poor's 500 Index (.SPX) added 4.62 points, or 0.56 percent, to 836.57. The Nasdaq Composite Index (.IXIC) gained 12.17 points, or 0.82 percent, to 1,489.46. The modest gains enabled the Dow to break a two-day losing streak. The broad S&P 500 is down more than 7 percent for the year so far, but it is up about 11 percent from the 11-year lows hit in late November. The S&P started the year up about 20 percent from those lows. Home Depot (HD.N) was among a spate of companies to announce deep job cuts, with the world's largest home-improvement retailer slashing 7,000 jobs. The Dow component rose 4.7 percent to $22.73. Companies across all sectors have been chopping jobs as they deal with slowing consumer demand and the fallout from the global economic downturn. Pfizer tumbled 10.3 percent to $15.65 on worries over what benefits -- if any -- it may reap from the acquisition, which had been rumored since last week. It is the biggest non-financial deal since March 2008. Wyeth retreated from earlier gains, falling 0.8 percent to $43.39. "I think there might be some questions about, all in all, what does it bring them," Brunner said of the Pfizer-Wyeth deal. "Is this the solution that they need to offset the Lipitor (patent) expiration? And the fact that their pipeline isn't great, does this get them a big pipeline? That could be argued." Financials turned lower in the afternoon and capped gains as investors fretted over whether the sector, which is at the heart of the credit crisis, will need to raise yet more capital. The S&P financial index (.GSPF) fell 2.1 percent. Among financial-sector laggards, Regions Financial Corp (RF.N) tumbled 12 percent to $4.10 after influential banking analyst Richard Bove said it may slash its dividend by 90 percent. Volume was moderate on the New York Stock Exchange, where about 1.27 billion shares changed hands, below last year's estimated daily average of 1.49 billion. On the Nasdaq, about 1.84 billion shares traded below last year's daily average of 2.28 billion. Advancing stocks outnumbered declining ones on the NYSE by 1,983 to 1,076, while on the Nasdaq, the trend also held, with 1,659 advancers to 1,039 decliners. (Editing by Jan Paschal)
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