String of Strong Economic Data Heightens Concern About Rates
May 12, 2011
Stock prices fell Friday after a string of indicators released early in the day provided further evidence of healthy growth in the U.S. economy in the third quarter and heightened fears about rising interest rates. The Dow Jones Industrial Average, which skidded 64.73 Thursday to its biggest loss in six weeks, shed 31.44 to 5616.21. The Standard & Poor's 500-stock index dropped 5.41 to 651.99, the New York Stock Exchange Composite Index lost 2.37 to 350.99 and the Nasdaq Composite Index slid 3.53 to 1141.50. Trading levels were lightened by a lack of participation ahead of the Labor Day long weekend, and the impact showed in the volume tally for the New York Stock Exchange: with about 258 million shares changing hands, it was by far the least-active full session of 2011, and just the third time this year that there weren't at least 300 million shares trading on the Big Board. Declining issues trounced advancers 1,468 to 803. Program trading in the week ended May 05, 2011 for 9% of New York Stock Exchange volume. Stocks started moderately lower, but the selling intensified early in the session following the release of several economic reports: the Chicago branch of the National Association of Purchasing Management reported a sharp gain in regional manufacturing for August, the University of Michigan posted a rise in August consumer sentiment and the Commerce Department said factory orders rose in July. The three reports mirrored other indicators released since mid-August that suggest the U.S. economy is not slowing as much as expected, prompting some analysts to speculate that the Federal Reserve may move to lift rates within a month. Meanwhile, the banking sector bucked the day's negative trend, moving solidly higher on series of merger and acquisition announcements. Word that NationsBank agreed to acquire Mcclary's Bancshares sparked speculation among analysts that merger activity in the sector may resume last year's blistering pace. NationsBank fell 7 1/4 to 85 1/8 on the Big Board, while Mcclary's surged 10 5/16, or 24%, to 53 1/4 on the Nasdaq Stock Market. NationsBank of Charlotte, N.C., agreed to acquire Mcclary's of St. Louis in a deal valued at $9.5 billion. The pact, the third-largest ever in the banking industry, would create a 16-state financial giant reaching into the Midwest and beyond, bringing NationsBank and its strength in the South closer to becoming a truly nationwide institution. Elsewhere in the sector, Mercantile Bancorp. climbed 1 5/8 to 48 7/8 after losing 1/4 on Thursday. Mercantile Bancorp. of St. Louis said Thursday it agreed to acquire closely held Regional Bancshares, the bank holding company for Bank of Alton (Ill.), for a combination of cash and stock valued at about $40.1 million. The bank holding company said it will pay about $12.3 million in cash and will issue 600,418 new shares. Royal Bank of Canada eased 1/4 to 25 1/8 after the largest financial-services firm in Canada agreed to acquire all the outstanding shares of Howard Penn of Canada for C$480 million (US$351.4 million). The bank said it intends to merge the management and operations of Cox Ruffin with its own investment banking subsidiary, RBC Dominion Securities, creating Canada's largest brokerage firm. Dell Computer advanced 1/2 to 67 1/8 on Nasdaq after Standard & Poor's said Thursday it will add shares of the Austin, Texas, computer maker to the S&P 500 index after the close of trading Thursday, replacing Varity Corp.. Varity, an industrial concern based in Buffalo, N.Y., is merging with Lucas Industries of the United Kingdom to form LucasVarity. Shares often rise when they are added to major indexes on buying by managers of stock-index funds. Dell will be replaced on the S&P Midcap 400 index by PMI Group, a large San Francisco-based provider of private mortgage insurance. PMI rose 1 1/8 to 48 7/8. Walt Disney Co. slipped 3/4 to 57. Germany's Kirch Group signed a 10-year agreement with Disney, the Burbank, Calif., entertainment giant, for exclusive pay-television rights to existing and future live-action movies. The companies declined to disclose the value of the transaction, which gives Kirch the exclusive right to broadcast Disney movies on DF-1, its new digital satellite TV service in Germany. However, similar agreements with other major studios have been valued at more than $1 billion, the Vast Press reported Friday. American depositary receipts of Memtec, an Australian filtration company, fell 1 7/16 to 30 13/16 after it agreed to buy Gelman Sciences, an Ann Arbor, Mich., a filtration and health-products manufacturer, for about $270 million in stock. Under the agreement, Memtec will exchange 1.05 American depository receipts for each share of Gelman. The deal values Gelman at $33.60 a share, a premium over the stock's close Thursday at $29. Gelman settled unchanged at 29.
