US stocks closed higher on Thursday for the first time in three days after a volatile session in which investors shrugged off concerns about high oil prices and sluggish demand for microchips.
Data showing that economic growth was slightly better than initial estimates in the fourth-quarter last year buoyed sentiment in early trade.
Steelmakers led the way up after US Steel agreed to buy Lone Star Technologies – a maker of steel products used in oil and gas wells – for $2.1bn in cash, in the latest example of rapid steel industry consolidation.
By contrast, technology stocks were on the defensive after ATMI and RF Micro Devices both warned about demand for microchips and cut forecasts for first quarter earnings. Shares in ATMI and RF Micro fell 6.8 per cent and 6.3 per cent respectively to $30.68 and $6.31.
The S&P 500 dipped into negative territory amid heightened tension between Iran and the UK over the fate of 15 captured sailors. The index bounced back in late trade to close 0.4 per cent higher at 1,422.53.
The Dow Jones Industrial Average was up 0.4 at 12,348.75. The Nasdaq Composite was flat at 2,417.88.
“The economic news was encouraging. Considering the rise in oil prices we have had a pretty good day,” said Al Goldman, chief market strategist at AG Edwards.
The $67.50-a-share offer from US Steel for Lone Star Technologies represented a 39 per cent premium to Lone Star’s closing share price on Wednesday.
Shares in Lone Star jumped 36.5 per cent to $66.11 while US Steel was 3.7 per cent higher at $101.22.
Takeover speculation lifted other shares in the steel sector. IPSCO jumped 10.3 per cent to $130.41, a record high, on rumours of a potential approach. Steel Dynamics rose 4.8 per cent to $42.70.
Rising oil prices helped Exxon climb 0.9 per cent to $76.24 while Chevron was 1.2 per cent higher at $74.95.
Shares in TXU eased 0.9 per cent to $64.36 after Texas regulators recommended that the utility pay $210m for allegedly manipulating the state’s electricity market two years ago.
The Texas Public Utility Commission’s unexpectedly tough recommendation is a sign of rising regulatory interest in the proposed $32bn takeover of TXU by Kohlberg Kravis Roberts and TPG, the private equity groups. The utility has faced criticism for strong profit growth amid high electricity prices in Texas.
Citigroup gained 0.9 per cent to $51.40. Speculation that it might bid for ABN Amro was quashed after Barclays said it had appointed Citi to advise on its own efforts to buy the Dutch bank.
In earnings news, Nabors Industries fell 1.7 per cent to $29.93 after the land-based oil and gas drilling group said its first quarter earnings would miss forecasts because of weak US demand.
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