Takeovers, yield rise lead stocks to be mixed Dow increases 36.37 with DuPont's gain, but Nasdaq falls 16.30

May 12, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks were mixed yesterday as rising borrowing costs curbed optimism that corporate profits would benefit from the wave of acquisitions sweeping American industry.

Stocks surged initially after five multibillion-dollar takeovers, topped by SBC Communications Inc.'s $62 billion offer for Ameritech Corp., drove expectations that shares would rise to highs. The subsequent jump in bond yields, though, led some investors to question that forecast.

The Dow Jones industrial average rose 36.37 to 9,091.52, after gaining 135 points earlier in the day. DuPont Co. rose $5.4375 to $79.50. The biggest U.S. chemicals company will sell 20 percent of its Conoco oil unit in an initial public offering, part of a plan to divest the business. If the company's stock had been unchanged, the Dow would have risen just 15 points.

The Standard & Poor's 500 index fell 1.50 to 1,106.64, and the Nasdaq composite index slumped 16.30 to 1,848.07. Both indexes reached records less than three weeks ago, before the threat of higher interest rates dented investor optimism.

Among other broad market indexes, the Russell 2,000 index of small-capitalization stocks fell 2.61 to 476.90; the Wilshire 5,000 index lost 24.31 to 10,548.61; the American Stock Exchange composite index slipped 0.20 to 744.03; and the S&P 400 midcap index slid 2.28 to 372.33.

The Bloomberg Maryland index, which tracks the top 100 stocks in Maryland by market valuation, fell 0.78 to 239.44.

The yield on the benchmark 30-year Treasury bond rose to 6.03 percent from 5.97 percent, its first rise above 6 percent in more than a week, as the Treasury and other borrowers prepared to sell $33 billion of debt.

Last week, the Dow industrials suffered a three-day, 2.3 percent drop on concern that interest rates would rise to keep the economy from overheating and causing inflation to accelerate. The Federal Reserve's interest-rate policy committee meets May 19.

About four stocks fell for every three that rose on the New York Stock Exchange, where about 557 million shares changed hands. An average 617 million shares traded daily during the past three months.

SBC Communications' acquisition of Ameritech is the second-largest in history, behind last month's $70.3 billion merger between Travelers Group Inc. and Citicorp. SBC will pay $51.08 for each Ameritech share, 27 percent above Friday's close. Ameritech rose 2.125 to 46 yesterday.

Five of the top 10 mergers and acquisitions in history were announced this year. About $918 billion mergers are in the works so far this year, on a pace to top the $1.6 trillion for last year.

DeKalb Genetics Corp. rallied $17.25 to $94.25 after Monsanto Co. offered $2.5 billion for the 60 percent of the seed company it doesn't own. Western Atlas Inc. surged $11.50 to $92.875 after Baker Hughes Inc. agreed to buy the company for $6.2 billion in stock and assumed debt.

Stone Container Corp. rose $2.625 to $20.625 after Jefferson VTC Smurfit Corp. agreed to buy the paper company for $6.42 billion.

And Seagram Co. gained $1.125 to $43.125 on speculation that the entertainment and beverage company is close to an agreement to purchase PolyGram NV, the world's largest recorded-music company, for between $9 billion and $10 billion. PolyGram rose 4.9 guilders to 102.5 in Amsterdam.

Incyte Pharmaceuticals Inc. slid $6.4688 to $33.6563 on concern that Perkin-Elmer Corp.'s plan to form a company with a top gene researcher to map human DNA faster will cut into Incyte's business. Perkin-Elmer rose $4.25 to $72.75.

And PSS World Medical Inc. fell $4.9375 to $14.4375 after the company said it expects fiscal 1998 and 1999 earnings to fall below analysts' expectations, because it will increase spending related to its acquisition of another medical-products distributor.

Pub Date: 5/12/98

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