Mergers and acquisitions news dominated action on Wall Street on Monday as investors digested three multi-billion dollar deals, including Ebay’s $2.6bn acquisition of Skype, the internet telephone service.
The leading US indices struggled to find momentum, however, as investors marked the beginning of a return to business as usual after two weeks assessing Hurricane Katrina’s likely impact on stocks.
By the close, the Dow Jones Industrial Average rose fractionally to 10,682.94. The S&P 500 slipped a fraction of a point to 1,240.57, and the Nasdaq Composite rose 7.3 points, or 0.3 per cent, to 2,182.83.
The flat performance followed a strong gains last week as investors expressed optimism that Hurricane Katrina could spark a construction boom.
Jim Paulsen, chief investment strategist at Wells Capital Management, said investors were already beginning to look beyond the storm’s immediate impact and to refocus on fundamentals.
“The stock market has been going slowly higher, but profits have been going up much faster,” leaving stocks looking relatively undervalued even though they are up sharply from cycle lows, Mr Paulsen said. “It says something about the strength of the undertow in this market that we could have Katrina and it barely made a dent.”
Three new multi-billion dollar deals set the early tone. Ebay announced a deal to buy Skype, the European internet telephony group, for $2.6bn in cash and stock. Shares in the online auction site rose 0.8 per cent to $38.94.
Siebel Systems, the business software group, jumped 12.7 per cent to $10.29 after a $10.66 per share offer from Oracle, a rival. The $5.9bn deal would create the world’s biggest customer relations management software company. Oracle rose 1.6 per cent to $13.49.
Elsewhere, Wachovia, the banking and brokerage group, fell 1.6 per cent to $49.57 after it announced a $3.9bn decision to buy WFS Financial, an auto lending business. Westcorp, the bank that owns 84 per cent of WFS, rose 0.4 per cent to $61.58, while shares in WFS jumped 8 per cent o $70.15.
Dynegy, the natural gas producer, fell 1.9 per cent to $4.66. The company had warned that two of its natural gas facilities were damaged by Katrina.
Oil groups fell as crude prices continued to retreat from record highs. Sunoco, the oil refiner, fell 4.5 per cent to $76.09. Exxon Mobil fell 1.1 per cent to $62.52.
Shares in Delta Air Lines fell 22.7 per cent to 85 cents amid reports that a bankruptcy filing may be imminent. Northwest Airlines, a rival that is also struggling to avoid bankruptcy, fell 3.3 per cent to $3.31 after talks with its striking mechanics collapsed.
Ford Motorrose 0.2 per cent after the automaker struck a tentative labour deal with the Canadian Auto Workers union. Home Depot, the building supply store, rose 0.3 per cent to $41.33. Halliburton, the contractor, fell 3.8 per cent to $63.60.