Stock indexes rise to five-year highs amid merger optimism

Investors returned from the President's Day weekend and moved stock prices higher on Tuesday ahead of key reports on housing and inflation.

The Dow Jones Industrial Average gained 53.91 points to 14,035.69, less than 130 points away from the all-time high set in October 2007. The Nasdaq Composite Index rose 21.56 points to 3,213.59 and the S&P 500 Stock Index was up 11.15 points to 1,530.94.

Reports on new home construction activity and inflation at the wholesale level will be released on Wednesday.

Gold continued its recent decline falling for the fourth consecutive session, down $5.30 to $1,604.20 an ounce, the lowest level since August. Oil was up 80 cents to $96.66 a barrel.

Office Depot Inc. (NYSE: ODP) soared 9.4 percent and OfficeMax Inc. (NYSE: OMX) surged 21 percent as a person familiar with the matter said the companies have discussed a merger and may announce a deal as early as this week. Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C) rose more than 1.3 percent as financial shares rallied. Google Inc. (Nasdaq: GOOG) jumped 1.8 percent, surpassing $800 for the first time.

“More deals out there do create a good sentiment,” Kevin Divney, chief investment officer at Beaconcrest Capital Management in Boston, said in an phone interview. “CEOs now are looking further out, and that’s been the issue the past four years. If we can extend horizons it makes for better strategic decisions.”

The S&P 500 completed its seventh consecutive weekly advance on Feb. 15, climbing 0.1 percent for the five days amid optimism over corporate merger activity and better-than- estimated economic data. The benchmark gauge is 2.2 percent below its 2007 all-time high of 1,565.15, while the Dow is 0.9 percent from its record high of 14,164.53.

Best Buy Co. (NYSE: BBY) gained 2.7 percent to $17.33 after Alan Rifkin, an analyst at Barclays Plc (NYSE: BCS), raised the retailer of electronic goods to overweight, the equivalent of buy, from equal weight.

General Mills Inc. (NYSE: GIS) added 1.9 percent to $45.43. The maker of Cheerios cereal said profit would rise at a high single-digit percentage rate in fiscal 2014 and reiterated its earnings forecast for this year.

Sealed Air Corp. (NYSE: SEE) jumped 9 percent to $21.15. The packaging manufacturer posted fourth-quarter revenue of $1.98 billion, topping the $1.94 billion average estimate in a Bloomberg survey of analysts.

An index of homebuilders dropped 1.2 percent, with nine of its 11 members declining. PulteGroup Inc. (NYSE: PHM) tumbled 1.8 percent to $19.95 and D.R. Horton Inc. (NYSE: DHI) lost 1.6 percent to $23.29.

Humana Inc. (NYSE: HUM) tumbled 6.4 percent to $73.01 for the biggest drop in the S&P 500. The private Medicare insurer said the U.S. government’s preliminary Medicare Advantage payment rates were less than the company anticipated. The proposed rates also sent other insurers’ shares down. UnitedHealth Group Inc. (NYSE: UNH) fell 1.2 percent to $56.66. Cigna Corp. (NYSE: CI) lost 1.1 percent to $60.43.

Wynn Resorts Ltd. (Nasdaq: WYNN) dropped 2.1 percent to $120.39 after CLSA Ltd. downgraded Wynn Macau, the Hong Kong-listed unit of billionaire Steve Wynn’s Las Vegas-based company, to outperform from buy. Las Vegas Sands Corp. (NYSE: LVS) tumbled 3.1 percent to $51.25.

Bloomberg News contributed to this report.

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