Shares in Southern Union jumped after Energy Transfer said it would buy the gas pipeline operator for $4.2bn, while the wider markets came back slightly from the sharp losses in the previous session as sentiment was lifted by some promising economic data.
Southern Union, the Houston-based gas group, rose 17.6 per cent to $33.22 while Energy Transfer was flat at $46.94 on news of the deal, which is set to create the largest natural gas pipeline company in the US.
Elsewhere in the energy sector, ConocoPhillips was up 1.5 per cent to $71.62 while Marathon Oil added 0.8 per cent to $51.19 as oil prices edged higher.
In the wider markets, the S&P 500 index added 0.2 per cent to 1,267.64 – paring just a fraction of the 1.7 per cent losses in the previous session – employment data and housing data came in better than had been expected.
Figures from the Labor Department showed that new applications for jobless benefits eased by 16,000 to 414,000 last week, which was more than the 7,000 drop expected by economists.
Separate data on housing provided a glimmer of hope in a downtrodden sector. Housing starts were up this month and housing permits, which are an indicator of future construction levels, hit their highest level since December.
But the gains were limited by weak data from the Philadelphia Fed after its manufacturing index recorded an unexpected drop into negative territory for June.
But overall these figures supported the markets, making a welcome change from the dismal run of data lately that have left the S&P 500 down 7 per cent in the past month and a half.
The markets are still on course, however, for their longest run of weekly losses in a decade after nearly seven straight weeks of declines on the S&P 500.
Still, the Dow Jones Industrial Average was up 0.5 per cent at 11,961.51 in the session, while the Nasdaq Composite fell 0.3 per cent to 2,623.70.
“The markets were up after some good economic data, but it is unlikely to last,” said Peter Cardillo, chief market economist at Avalon Partners, echoing what many other analysts were saying in the session.
“We will probably see another 2-3 per cent losses from these levels before we begin a consolidation period later on in the summer,” he said.
The options market gives weight to this argument. The put/call ratio for equity options jumped up to a two and a half year high in the previous session, meaning more people are buying insurance against the markets falling than at any time in the past few years.
The ratio was at 1.11, its highest point since November 2008 and far above the 150 day moving average of 0.66.
The Vix volatility index, also known as Wall Street’s “fear gauge”, jumped up again in the session, adding 6.2 per cent to 22.64. The index is now up 47.8 per cent since the start of this month.
Financial stocks were the best performing in the session. Wells Fargo was up 0.9 per cent to $26.80 while Bank of America added 1 per cent to $10.60. The S&P financial index was up 0.6 per cent.
Financial stocks have seen some of the worst losses during the downturn, and many analysts had been starting to argue that the sector was oversold.
The technology sector was weighed on by Finisar, the fibre-optic equipment maker, which fell 16.3 per cent to $14.84 after giving a current-quarter outlook which fell short of Wall Street’s expectations.
JDS Uniphase, another network equipment maker, was down 5.8 per cent to $15.57 while Ciena lost 4.7 per cent to $17.26.
Ford Motor also provided a disappointing forecast, saying late on Wednesday that its second-quarter profits would fall below analysts’ estimates. The stock was down 2.4 per cent to $12.83.
The real estate sector was up in the session, helped by the positive housing data. Ventas, a real estate investment trust, climbed 1 per cent to $52.36 while HCP added 2.1 per cent to $36.69. The S&P real estate index was up 0.8 per cent.
In more deal news, DG Fastchannel agreed to acquire MediaMind Technologies, a digital advertising company, for about $517m, sending shares in the target company up 37.5 per cent to $21.19. Shares in DG Fastchannel lost 1.4 per cent to $28.50.
Winnebago Industries shed 20.5 per cent to $8.75 after reporting third-quarter earnings that were below analysts’ expectations.