- The Washington Times - Tuesday, July 8, 2003

NEW YORK (AP) — A string of merger announcements gave Wall Street a moderate lift yesterday, extending the market’s rally to a second day and pushing the Nasdaq Composite Index to its highest level in nearly 15 months.

Blue chip stocks, which struggled for much of the session, overcame their losses during the last hour of trading. Analysts attributed the market’s advance to a sudden pickup in merger activity.

Yellow Corp. said it was acquiring rival trucking company Roadway, and data storage maker EMC announced it was purchasing competitor Legato. Also, auto-parts maker ArvinMeritor said it will make an unsolicited, $2.2 billion bid to take over its larger rival Dana Corp.

“What’s kind of stirring everyone’s interest today are the deals,” said Hugh Johnson, chief investment officer at First Albany Corp.

The Dow Jones Industrial Average recovered from a loss of more than 53 points to close up 6.30, or 0.1 percent, at 9,223.09. The gain was a modest addition to the 146.58-point win Monday.

The broader market also was higher. The Nasdaq rose 25.75, or 1.5 percent, to 1,746.46, its highest level since April 22 last year, when it stood at 1,758.68. On Monday, the Nasdaq surged 57.25 to score its highest close since May 17 last year.

The Standard & Poor’s 500 index advanced 3.42, or 0.3 percent, to 1,007.84, having gained 18.72 in the previous session.

Investors initially were inclined to collect profits yesterday. But the merger announcements, which followed a spate of other consolidation news in recent weeks, added to the market’s belief that corporate America is feeling more secure about the economy.

“It suggests that there is hope, that business leaders have confidence in this recovery and are willing to do some deals,” said Jeff Kleintop, chief investment strategist for PNC Financial Services Group in Philadelphia.

Roadway surged $16.08, or 53.6 percent, to $46.10, while Yellow fell $1.24 to $23.25. Yellow is paying $966 million in cash and stock to acquire Roadway, a huge premium over Roadway’s recent market valuation.

EMC fell 50 cents to $11.24 on news that it will acquire rival Legato in a stock deal valued at $1.3 billion. The company also announced that its second-quarter results will top analysts’ forecast by 3 cents a share. Legato rose 81 cents to $9.91.

“The purchase by Yellow of Roadway, the purchase of Legato by EMC suggests that there is a lot of pressure on companies to use their cash to make acquisitions to grow their revenues,” Mr. Johnson said.

“In other words, companies know that these stocks are cheap and they are doing something about it. They are putting their money out there, even though many believe the stock market is overvalued.”

There also was news yesterday of a hostile bid by ArvinMeritor for Dana. After failing to get Dana to discuss a potential buyout, ArvinMeritor said it will offer $15 in cash for all outstanding Dana shares, a 25 percent premium over Dana’s closing stock price Monday.

Yesterday, ArvinMeritor fell 71 cents to $20.29, while Dana climbed $4.18, or 34.8 percent, to $16.20.

In other trading, Pepsi Bottling Group advanced $1.52 to $22.25 on quarterly earnings that were a penny a share higher than analysts had expected.

Alcoa rose 10 cents to $25.81 ahead of earnings released after the market’s close. After trading ended, Alcoa posted second-quarter profits that exceeded expectations of analysts by 3 cents a share, and its shares rose $1.10 in the extended-hours session.

Also, Four Seasons Hotels fell 40 cents to $44.50 after UBS Warburg cut its rating to “reduce” from “neutral.”

Advancing issues outnumbered decliners slightly more than 4-to-3 on the New York Stock Exchange. Volume was light at 1.54 billion shares, but above the 1.40 billion traded Monday.

The Russell 2000 index, the barometer of smaller-company stocks, rose 8.26, or 1.8 percent, to 473.97.

Overseas, Japan’s Nikkei stock average finished yesterday up 1.1 percent. In Europe, France’s CAC-40 fell 0.1 percent, Britain’s FTSE 100 slipped 0.03 and Germany’s DAX index rose 0.4 percent.


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