Merger activity, earnings optimism lift stocks slightly after early losses - The Buffalo News

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Merger activity, earnings optimism lift stocks slightly after early losses

U.S. stocks were little changed, after erasing an earlier loss, as merger activity and optimism over corporate earnings offset concern over crises abroad before a Federal Reserve policy decision.

Tyson Foods Inc. climbed 2.6 percent as it agreed to sell poultry businesses in Mexico and Brazil for $575 million. Cummins Inc. fell 3.2 percent to lead declines among industrial shares.

The Standard & Poor’s 500 Index added less than 0.1 percent to 1,978.91, erasing an earlier drop of as much as 0.6 percent. The Dow Jones industrial average rose 22.02 points, or 0.1 percent, to 16,982.59. More than 5.4 billion shares changed hands on U.S. exchanges, 5.7 percent below the three month average.

Mergers and acquisitions are booming amid low interest rates and growing corporate cash hoarding. More than $1.1 trillion worth of takeovers have been announced this year, exceeding the total of 2013, data compiled by Bloomberg shows.

Quarterly profit growth is poised for the fastest increase in almost three years. Companies in the S&P 500 have reported an 11 percent gain in second-quarter earnings, data compiled by Bloomberg shows. Should the pace continue, the gain would exceed all periods since the third quarter of 2011.

Pfizer Inc., Reynolds American Inc. and American Express Co. are among some 150 S&P 500 companies reporting earnings this week.

About 78 percent of U.S. companies that have posted results this season have beaten analysts’ estimates for profit, while 66 percent exceeded sales projections, according to data compiled by Bloomberg.

“I wouldn’t say that we’re putting on our cowboy hats and saying this is an unstoppable bull, but you have a lot of factors going in the right direction,” said Patricia Edwards, Seattle-based managing director of investments at the Private Client Reserve of U.S. Bank Wealth Management. “We’re seeing continued upward momentum in the economy. You’ve got the earnings that have been coming in fairly well, and you’ve got the mergers and acquisitions.”

The U.S. central bank announces its next policy decision at the conclusion of a two-day meeting Wednesday.

Investors will get a reading on second-quarter growth that same day, while the government’s labor report Friday may show employers added 231,000 jobs this month.

Fed Chairwoman Janet Yellen and her fellow policy makers are debating how long to keep interest rates near zero as the U.S. labor market improves and inflation moves closer to the Fed’s 2 percent goal.

Three rounds of monetary stimulus from the Fed and better than-forecast corporate earnings have driven the S&P 500 up 192 percent from its March 2009 bottom.

The S&P 500 is trading at 18.1 times earnings of its members, around the highest valuation for the gauge since 2010.

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