Share prices of office supply retailers soared after reports of a possible merger between OfficeMax and Office Depot.
Shares in OfficeMax jumped 20.9 per cent to $13.00 after the Wall Street Journal reported a possible merger. The stock has gained more than 125 per cent in the past 12 months.
Office Depot rose as high as 30 per cent but eased to trade 9.4 per cent higher at $5.02. Shares in larger rival Staples also rallied, rising 13.1 per cent to $14.65, making it the best performer in the S&P 500 index.
Analysts at Nomura said the “consolidation – if it occurred – would be very positive for an overcrowded sector”.
They added in a note to clients: “Financially, the significant amount of synergies could lead to upside for both Office Depot and OfficeMax shareholders. Staples would also be a winner in either scenario. It would stand to pick up lost sales from store closings. If events highlighted by the press were indeed to develop, the likely outcome would be good for all three players.”
The rest of the markets were higher in a holiday-shortened week. The S&P 500 index of large-cap stocks rose 0.7 per cent to 1,530.94 with nine of 10 main sectors trading in positive territory. Even though the benchmark’s march upwards has slowed in the past few weeks, it reached a fresh five-year high, inching closer to an all time record.
The Dow Jones Industrial Average added 0.4 per cent to 14,035.67, breaking through the psychologically important level of 14,000.
“All told, we believe equity markets have performed well so far in 2013, partially due to reduced headline and macro risks, better than expected corporate earnings, and early signs that economic growth is improving early in 2013,” wrote E. William Stone, chief investment strategist at PNC Asset Management Group.
“However, upcoming deadlines for US fiscal policy makers could be an impetus for market volatility in the coming weeks,” he added.
The technology-heavy Nasdaq Composite added 0.7 per cent to 3,213.59.
Apple shares closed slightly lower at $459.99 after volatile session as David Einhorn’s Greenlight Capital appeared in court on Tuesday, to present a case for blocking a shareholder vote – scheduled for next week – over three different proposals unless they are considered separately.
The hedge fund has been putting pressure on the iPhone and iPad maker to distribute some of its $137bn cash pile to shareholders. Apple shares have lost 13.5 per cent year to date, significantly underperforming the market and the technology sector.
Herbalife released its fourth-quarter earnings on Tuesday after the market close, broadly in line with expectations. Conference call with analysts is scheduled for Wednesday.
Shares in the company rose 2.6 per cent $39.74 ahead of results and have risen more than 20 per cent since the start of the year and moved 2 per cent higher in after-hours trading.
Best Buy shares rose 2.7 per cent to $17.33 after Citi agreed to issue and manage its branded credit cards in the US and bought about $7bn of loan portfolio from Capital One, which manages its consumer credit cards currently.
Humana shares fell sharply after the second-largest Medicare insurer said the US government’s preliminary Medicare Advantage payment rates were lower than the company expected. Shares fell 6.4 per cent to $73.01. Shares in Cigna and UnitedHealth Group also fell, by 1.1 per cent to $60.43 and 1.1 per cent to $56.66 respectively.