Wall St. rises as Berkshire deal points to M&A endurance

Wall Street opened higher on Monday, with the Dow looking to break a seven-day losing streak, after Warren Buffett’s Berkshire Hathaway’s $37.2 billion to buy Precision Castparts showed the M&A boom was alive and well.

Adding to the positive sentiment, poor data out of China boosted hopes for additional stimulus from Beijing. Greek banks could get a first capital injection soon after a bailout deal is agreed, and before the ECB can conduct stress tests, a euro zone official told Reuters.

Precision Castparts (PCP.N) shares jumped as much as 19.3 percent to $231.25 after Berkshire Hathaway (BRKa.N) (BRKb.N) agreed to buy the aircraft components in the biggest deal for Buffett’s Hathaway. Berkshire Class B shares fell 1.4 percent to $141.60.

As the U.S. Federal Reserve has kept interest rates near zero for nearly a decade, debt has been cheap, leading to a rise in merger and acquisition activity.

Up to the end of July, cross-border M&A activity totaled $913.5 billion, up 23 percent from a year ago.

July was the seventh strongest month for deal activity since 1980, according to Thomson Reuters data, showing the hunger for acquisitions as the Fed prepares to hike rate later this year.

“The M&A environment is ripe for more deals and at the end of the year you will see a lot more deals than what we saw last year,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

At 9:45 a.m. ET the Dow Jones industrial average .DJI was up 169.8 points, or 0.98 percent, at 17,543.18. All the Dow components were higher.

The S&P 500 .SPX was up 19.9 points, or 0.96 percent, at 2,097.47 and the Nasdaq composite .IXIC was up 56.49 points, or 1.12 percent, at 5,100.04.

All the 10 major S&P sectors were higher, led by the industrials index’s .SPLRCI 1.3 percent. Precision Castparts gave the biggest boost to the index and the second biggest boost to the S&P 500.

In other deal news, ammonia maker CVR Partners (UAN.N) said it would acquire Rentech Nitrogen Partners (RNF.N) for about $533 million. Rentech soared 23.3 percent to $12.70.

Mallinckrodt (MNK.N) fell 0.6 percent to $99.73 after the drugmaker said it would buy immunotherapy company Therakos in a deal valued at about $1.33 billion.

 

IBM (IBM.N) rose 0.8 percent to $156.36 after Buffett’s comments on CNBC were interpreted to mean that he would be interested in buying more IBM stock.

U.S. stocks ended lower on Friday, with the Dow closing down for the seventh straight day, after solid job growth data for July pried the door open a little wider for a potential rate in September.

“I think the Fed is desperate to raise rates this year and I think it will happen in September. The only fly in the ointment is the inflation rate which is below what the Fed wants,” said Hogan.

Dean Foods (DF.N) fell 11.3 percent to $15.67 after the largest U.S. milk processor reported a bigger-than-expected drop in quarterly sales.

Companies scheduled to report results after the close of trading on Monday include Shake Shack (SHAK.N).

Advancing issues outnumbered decliners on the NYSE by 2,201 to 506. On the Nasdaq, 1,881 issues rose and 497 fell.

The S&P 500 index showed 21 new 52-week highs and three new lows, while the Nasdaq recorded 23 new highs and 31 new lows.

Source: Reuters