Kraft Foods lost ground after lowering its full-year earnings forecast but the wider markets were up after healthy consumer confidence data and the resignation of Hosni Mubarak as president of Egypt.
The world’s second-largest food company by sales forecast that 2011 earnings would come in below expectations, sending the shares down 1.5 per cent to $30.66.
Operating income for the fourth-quarter was also disappointing, brought down by the integration costs from Kraft’s acquisition of Cadbury, a UK confectioner, last year.
But the S&P 500 closed up 0.6 per cent to 1,329.15, a 2½-year high, paring earlier losses after data from the University of Michigan showed that consumer confidence rose in February. This helped the index post a weekly gain of 1.4 per cent.
The Dow Jones Industrial Average was up 0.4 per cent to 12,273.26, up 1.5 per cent over the week, while the Nasdaq Composite added 0.7 per cent to 2,809.44, a gain of 1.4 per cent over the last five days.
Markets were given a further lift after Hosni Mubarak stepped down as president of Egypt, ending the uncertainty that has worried the markets for 18 days. The Vix volatility index, a measure of fear in the marketplace, was down 2.6 per cent to 15.68.
But the gains following the resignation were modest as investors struggled to work out long-term effects. “This is a short-term release for the markets, but it could be a long-term negative. We know we are losing a friend, but are we gaining an enemy?” said Peter Cardillo, chief market economist at Avalon Partners.
Biotechnology stocks lost ground after Cephalon said its profits had fallen in the fourth quarter and that it had received a subpoena from the US Postal Service’s investigative arm seeking information about its cancer-pain drug Fentora.
The shares were down 2.6 per cent to $58.56. Related stock Amgen lost 1 per cent to $53.74.
In other earnings news, Expedia, the online travel company, reported a 30 per cent drop in net income for the fourth quarter. This fell short of expectations and sent shares down 17.1 per cent to $21.31. Bank of America Merrill Lynch also cut its recommendation to “neutral” from “buy”.
Kinder Morgan, the energy pipeline operator, saw a successful first day of trading after its initial public offering. The shares were up 3.5 per cent to $31.05 after the largest private equity-backed US offering at $30 a share, valuing the company at $21bn.
US shares in Nokia were down 14 per cent to $9.36 after it announced a “broad strategic partnership” with Microsoft to make Windows its main phone operating system to compete against Apple and Google in the smartphone market.
But investors in Apple and Google were unruffled, with Apple up 0.7 per cent to $356.85, while Google rose 1.3 per cent to $624.50. Microsoft, however, was down 0.9 per cent to $27.25.
The wider markets were given little direction from the Commerce Department’s balance of payments data for December. The figures showed that the US trade deficit had widened more than economists had expected at the end of the year. However, exports as well as imports continued to rise, pointing to a strengthening economic recovery late last year.
The week was dominated by a spate of deal activity which drove the S&P higher. In other earnings news, Panera Bread, a bakery chain, jumped 16.5 per cent to $116.11 after the company lifted its full-year earnings estimate for 2011 to as much as $4.45 a share.
Another restaurant chain, Chipotle Mexican Grill, rose 4.7 per cent to $268.73 after reporting fourth-quarter earnings on an adjusted basis of $1.47, beating the average estimate of $1.30.
On Monday Ensco, the UK oil services provider, said it would buy Pride International for $7.1bn in a move that would create the world’s second-largest offshore drilling company.
Danaher, an acquisitive US conglomerate, agreed to buy Beckman Coulter, a maker of diagnostic equipment, for $6.8bn.
Danaher was up 5.3 per cent to $51.61 over the week while Beckman Coulter was up 0.2 per cent to $82.78. Pride International gained 0.7 per cent to $40.08.
This mergers and acquisition theme continued on Wednesday when NYSE Euronext, the world’s largest stock exchange by revenue, announced that it was in advanced merger talks with Deutsche Börse, the main German exchange. NYSE gained 13.5 per cent to $38.31 over the week.
Strong earnings results from McDonald’s and Walt Disney, up 3.7 per cent and 6 per cent respectively over the week, also helped the wider market push forward to 2½-year highs.
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