Stocks rise as Oracle deal cheers investors
Investors pushed stocks substantially higher today as Wall Street greeted the Oracle-PeopleSoft merger and a climb in retail sales as signs of continued economic improvement.
Oracle Corp. announced that PeopleSoft Inc. would accept a 26.50 dollar (€19.91) per-share bid, valuing the rival software company at 10.3 billion dollars (€7.74 billion).
The agreement ends an 18-month feud between the two that featured courtroom intrigue and pithy public statements, and cheered investors who feared the battle would distract the companies from their core businesses.
Wall Street also applauded the Commerce Department’s report on November retail sales, which rose 0.1%, better than the flat sales economists had expected. Taking auto sales out of the equation, retail sales rose 0.5% for the month.
Wall Street had expected a 0.3% rise excluding autos.
“I think the retail sales numbers helped, alleviating a lot of the concern over holiday sales prospects. And then on top of that you have all this merger activity,” said Bryan Piskorowski, market strategist for Wachovia Securities. “Mid-month is typically pretty quiet, but this news is bringing some people back into the market.”
The Dow Jones industrial average rose 95.10, or 0.9%, to 10,638.32, finishing near its high for the session.
Broader stock indicators were strongly higher. The Standard & Poor’s 500 index was up 10.68, or 0.9%, at 1,198.68, and the Nasdaq composite index gained 20.43, or 0.96%, to 2,148.50.
Investors also received good news from the Commerce Department’s latest business inventory report. The 0.2% rise in inventories for November was less than expected, meaning that demand for goods could be picking up.
A small rise in oil futures did little to rattle investors, who remain pleased that prices remain near their five-month lows. A barrel of light crude was quoted at 41.01 dollars, up 30 cents, on the New York Mercantile Exchange.
Between oil prices and the retail sales figures, investors were becoming more enthusiastic about the economy, analysts said, and were hopeful that the Federal Reserve, meeting tomorrow, would confirm that view in its policy statement.
“I think the economy is doing pretty well, better than a lot of people expected,” said Bill Groenveld, head trader for vFinance Investments. “If there’s not a lot of tax-related selling and we say in this trading range, we could be setting ourselves up for a nice new trend in January.”
In addition to completing the PeopleSoft deal, Oracle posted strong quarterly earnings, beating Wall Street profit forecasts by 3 cents per share.
The software maker also issued a better-than-expected outlook for the current quarter.
Oracle gained 1.35 dollars, or 10.2%, to 14.63 dollars, while PeopleSoft surged 2.47 dollars, or 10.4%, to 26.42 dollars.
In other merger news, Sprint Corp. and Nextel Communications Inc. reportedly are drawing closer to a 36 billion dollar merger pact.
However, Verizon Communications Inc.’s wireless division is also reportedly preparing a counter-bid for Nextel. Sprint added 30 cents to 24.44 dollars, Nextel climbed 23 cents to 29.99 dollars, and Verizon was up 48 cents at 41.28 dollars.
Dow Jones industrial component Honeywell Inc. gained 1.14 dollars to 36.45 dollars after the aerospace and defence manufacturer lowered its profit forecasts for 2005 but reiterated strong earnings for the current quarter and 2004.
Honeywell also announced plans to purchase British industrial holding company Novar PLC for 1.7 billion dollars.
Boeing Co. rose 25 cents 52.67 dollars despite scrubbing the second straight launch of its new Delta 4 high-payload rocket. The company had planned to launch the rocket Saturday, then Sunday, but pushed it back both times due to a temperature control problem.
The launch was supposed to be a demonstration for the US Air Force.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume was moderate.
The Russell 2000 index of smaller companies was up 5.79, or 0.92%, at 638.03.
