US stocks ended slightly higher on Monday as a new round of take-overs led by a $29 billion buyout bid for First Data Corp fuelled optimism about stock valuations, countering worries about the economy and turmoil in the housing market.
First Data, a credit card and payment processor, said it had agreed to a buyout bid by private equity firm Kohlberg Kravis Roberts & Co Its stock was the top percentage gainer, up 20.6 percent, on the New York Stock Exchange.
Meanwhile, a report showing weaker-than-expected factory activity and rising price pressures revived concerns about the economy's health. "Stocks, having pulled back from highs in the past week, are on better footing to withstand some of the news," said Steve Goldman, market strategist, Weeden & Co in Greenwich, Connecticut. Mergers are "shrinking the capital base, so that helps."
Shares of Altria Inc, parent of cigarette maker Philip Morris, jumped 3.5 percent in the stock's first day of trading after the company spun off its interest in Kraft Foods Inc. The Dow Jones industrial average was up 27.95 points, or 0.23 percent, at 12,382.30. The Standard & Poor's 500 Index was up 3.69 points, or 0.26 percent, at 1,424.55. The Nasdaq Composite Index was up 0.62 point, or 0.03 percent, at 2,422.26.
First Data shares rose $5.55 to $32.45. Weakness in software and semiconductor shares, which are sensitive to growth concerns, limited gains on Nasdaq, as well as a downgrade of computer maker Sun Microsystems Inc. The Institute for Supply Management said factory activity grew in March, but at a slower rate than in February and less than analysts had forecast.
The data also showed a jump in an inflation component, suggesting rising price pressures could dissuade the Federal Reserve from cutting interest rates soon even as growth slows. Financial stocks fell after subprime mortgage lender New Century Financial Corp filed for bankruptcy protection. The Philadelphia Keefe Bruyette & Woods index of bank stocks fell 1.5 percent and had its sharpest decline in nearly three weeks.
The sell-off in banking shares also followed a profit warning from M&T Bank Corp, whose stock dropped 8.5 percent, or $9.88, to $105.95, after it said late on Friday that problems in mortgages with limited income documentation would hurt results.
Shares of Altria gained $2.32 to end at $68.22, while Kraft shares fell 2.6 percent, or 81 cents, to $30.85, both on the NYSE. Altria shareholders received 0.692024 of a share of Kraft for each share held, Altria said in a statement.
Sun Microsystems shares declined 3.5 percent, or 21 cents, to $5.80 after Sanford C. Bernstein lowered its rating on the company's stock, saying fiscal third-quarter results could be disappointing.
Software maker Microsoft Corp a tech bellwether, fell 0.5 percent, or 13 cents, to $27.74. Among other take-over-related news, US phone company AT&T Inc said it and Mexican cell phone operator America Movil were in talks to buy stakes in the company that controls Telecom Italia for about $6.4 billion. AT&T shares ended up 3 cents at $39.46.
Trading was moderate, with many participants out this week for the Passover or Easter holidays, with about 1.51 billion shares changing hands on the NYSE, below last year's estimated daily average of 1.84 billion. On Nasdaq, about 1.77 billion shares traded, below last year's daily average of 2.02 billion. Advancing stocks outnumbered declining ones by a ratio of about 5 to 3 on the NYSE, while advancers equalled decliners on the Nasdaq.
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