Deal activity lifts US stocks

An upgrade to Alcoa and a flurry of deal activity helped lift US stocks higher on Monday. Analysts at Morgan Stanley raised Alcoa, the country’s largest aluminium producer, from “equal weight” to “overweight”, saying they expected a rally in aluminium prices to continue into the first half of next year. Shares in the group rose 7.9 per cent to $15.73. The weaker dollar helped to lift commodity-based stocks. United States Steel gained 6.3 per cent to $52.35. The S&P 500 finished just short of a 15-month closing high, gaining 1.1 per cent to 1,114.05. The Dow Jones Industrial Average had gained 0.8 per cent to 10,414.14 and the Nasdaq Composite was 1.2 per cent higher at 2,237.66. Wall Street suffered losses last week as the dollar strengthened and concern grew over the prospect of tighter monetary policy. Intel, the world’s largest computer chip maker, also benefited from an upgrade by analysts at Barclays, who raised the stock from “equal weight” to “overweight”. Concerns over gross margins and an investigation into competition issues by the Federal Trade Commission has weighed on the shares, resulting in an attractive valuation, according to Barclays. Intel rose 2.3 per cent to $20.09. Deal news in the construction and pharmaceutical sectors also helped to revived overall confidence in the market. Bucyrus International, the construction company, announced that it had bought Terex’s mining business for $1.3bn. In October, Terex posted its fourth straight quarterly loss after demand for construction equipment continued to fall during the recession. Shares in Terex jumped 9 per cent to $20.94 while Bucyrus climbed 9.8 per cent to $55.84. Athersys, the pharmaceutical company, sold the rights of its stem cell treatment for inflammatory bowel disease to Pfizer for up to $111m. Athersys shares more than doubled to $2.40 while Pfizer, the world’s largest drugmaker, was up 1.7 per cent to $18.61. Incyte also sold the rights to its experimental pill to treat inflammatory conditions to Eli Lilly & Co. Incyte, which could receive as much as $665m in additional payments, rose 2.8 per cent to $8.73. Eli Lilly edged 1.5 per cent higher to $36.24. “We’ve virtually gone sideways on the S&P 500 for almost six-and-a-half weeks now,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “Neither the bulls nor the bears want to take advantage of the end of the year and it seems like people are content to sit on the sidelines. But M&A activity today is playing into some early strength.” Elsewhere in the pharmaceutical sector, Human Genome Sciences rose 5.1 per cent to $29.60 after the drugmaker was rated “overweight” at Morgan Stanley. Analysts cited the growth potential of Benlysta, which could be the first drug approved for lupus in 50 years. Health insurers led the market higher from the opening bell after Senate Democrats pushed back the start date of a proposed insurer tax. The tax, which is expected to drive up premiums, was originally set to begin next year, eating into insurers’ 2010 earnings per share. Aetna advanced 4.7 per cent to $34.04, Cigna climbed 3.9 per cent to $37.19 and UnitedHealth added 2 per cent to $32.17. The technology sector was also up by more than1 per cent. Shares in Seagate Technology climbed 1.3 per cent to $17.68 after Robert W.?Baird upgraded the stock from “neutral” to “outperform”. Analysts at the brokerage said the company would be likely to benefit from increased spending on hardware as the economy recovers. Walgreen, the retail pharmacy chain, said its first-quarter profit had jumped almost 20 per cent. However, S&P cut the group’s price target from $41 to $38. Its shares closed down 0.1 per cent at $36.61. E-Trade Financial, which has been under intense regulatory pressure to shore up its balance sheet, fell 1.1 per cent to $1.76. Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.