US stocks struggled to maintain their upward momentum on Monday as investors digested fresh earnings and deal news ahead of the Federal Reserve decision on Wednesday on interest rates.
Investors had responded positively to fresh merger news including Alcoa’s hostile $27bn bid for Canadian aluminium making rival Alcan.
Alcoa made the bid, late on Sunday, to buy Alcan with an offer of $73.25 per share. The bid is a 32 per cent premium to Alcan’s average closing price over the past 30 sessions.
Alcoa gained 6.2 per cent to $37.88, while Alcan, based in Montreal, soared 35.5 per cent to $82.11.
By the close of trade in New York, the S&P 500 index was up 0.3 per cent at 1,509.5. The Nasdaq Composite index was down 0.1 per cent at 2,571, pulled lower by an analyst downgrade of internet company Amazon, which fell 3.8 per cent to $60.85.
The Dow Jones Industrial Average was up 0.4 per cent at 13,313, off its high for the session of 13,317.7. It was the Dow’s fifth successive closing record.
Last Friday, the S&P 500 reached its best level since late 2000.
The Russell 2000 index of smaller companies was down 0.1 per cent, to 831.9. Investors are awaiting the Federal Reserve’s rates decision. The Fed’s consumer credit report, released on Monday, showed that consumer credit increased at a brisk annual rate of 6.7 per cent in March.
Alfred Goldman, chief market strategist at AG Edwards, said: “Momentum breeds momentum, and I think you’ve seen a certain amount of herd mentality today and for the past few weeks. Most people hate to be different, and you are certainly seeing some panic buying by institutions.
“So the momentum builds on itself and creates more risk in the short term. What you have seen, with the Dow up 11 per cent over the past seven weeks, is the equivalent of a 15-month rally in just under two months.”
Marc Pado, chief market strategist at Cantor Fitzgerald, said that as the rally had been consumer-driven, there might have been less momentum after Easter.
“Once you are past Easter, there is no real consumer-driven holiday until the back-to-school buying of September, and this is part of the reason you often see a general slowing from May.”
In other deal news, Armor Holdings agreed to be bought by UK defence contractor BAE Systems for $4.1bn. Armor shares were 5.4 per cent higher at $86.60.
ABN Amro rejected a $24bn bid for its LaSalle unit from a group led by Royal Bank of Scotland. ABN had previously agreed to sell Chicago bank LaSalle for $21bn to Bank of America. BofA shares were up 0.3 per cent at $51.38.
Businessman Warren Buffett said over the weekend that his company, Berkshire Hathaway, was open to making a “huge” acquisition, but said the right opportunity had yet to arise.
He said he might hire up to four people to succeed him as chief investment officer. Berkshire was up 1.1 per cent at $110,490.
Berkshire Hathaway announced higher first-quarter earnings and shareholders at the annual meeting overwhelmingly rejected a proposal to divest its $3.31bn stake in PetroChina over human rights issues.
Also at the weekend, the Ottaway family, which controls 6 per cent of the voting shares of Dow Jones, publisher of the Wall Street Journal, joined the Bancroft family, which controls 52 per cent, in expressing opposition to the proposed $5bn takeover by Rupert Murdoch’s News Corp. Dow Jones shares were off 0.5 per cent at $55.51.
In the technology sector, Dell agreed to work with Microsoft and Novell in an alliance that the rival software makers formed last year to make it easier for the Windows operating system and the increasingly popular Linux system to work together. Dell shares gained 1 per cent to $25.90.
Ford Motor shares lost 0.7 per cent to $8.16 after it said that it would close its casting plant in Brook Park, Ohio, in 2009. The plant employs 1,218 hourly and salaried workers.
It said it would shut its Cleveland Engine Plant 1 in Brook Park for at least a year, starting in two weeks.
The changes are part of Ford’s Way Forward restructuring plan under which it aims to close 16 facilities by 2012. It has already announced nine closures.