COMMENTARY | COLUMNISTS | GEORGE CHAMBERLIN

S&P 500 rises toward record as Forest Labs deal offsets economy

Stock prices were mixed Tuesday as investors returned from the Presidents Day holiday. Key reports on inflation and housing are due out later this week.

The Dow Jones Industrial Average fell 23.99 points to 16,130.40. However, the Nasdaq composite index rose for the eighth consecutive session, up 28.76 points to 4,272.78, and the Standard & Poor’s 500 Index rose 2.13 points to 1,840.76 -- within eight points of a record set last month.

Analysts continue to weigh the impact of the severe winter storms on the economy as consumer spending is affected by people restricted to their homes and the potential drop in vehicle sales.

Rising energy demands linked to the storms pushed oil prices up $2.13 to $102.43 a barrel, the highest level since Oct. 10. Gold dipped 0.4 percent to $1,323.75 an ounce.

Forest Laboratories (NYSE: FRX) surged 28 percent after Actavis Plc (NYSE: ACT) agreed to buy the maker of the Alzheimer’s drug Namenda. Coca-Cola Co. (NYSE: KO) dropped 3.8 percent as fourth-quarter profit fell.

Equities rose last week as Federal Reserve Chairwoman Janet Yellen pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps.” Economic growth has strengthened and there is “broad improvement” in the labor market, she said, adding that only a “notable change in the outlook” for the economy would prompt the central bank to slow the pace of tapering.

The Fed will release minutes from its Jan. 28 and 29 meeting Wednesday, giving details on central bank policymakers’ decision to trim bond purchases by $10 billion for a second time. Three rounds of stimulus have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.

Investors have dismissed weaker-than-forecast economic data, including January’s payrolls over the past two weeks, helping stocks recover from their worst start of a year since 2010. The S&P 500 had slumped as much as 5.8 percent since reaching a record on Jan. 15 as concern over Fed tapering fueled an exodus in emerging markets. The index has since climbed 5.7 percent, paring its 2014 loss to 0.4 percent.

A total of 12 S&P 500 companies were due to report earnings Tuesday. About 74 percent of those that have posted results for the fourth quarter have beaten estimates for profit and 64 percent have exceeded sales projections, according to data compiled by Bloomberg.

Companies in the gauge are exceeding analyst revenue forecasts by the most since 2012, a sign rising consumer demand is fueling economic expansion.

Seven out of 10 main groups in the S&P 500 rose, as health care shares advanced 0.9 percent for the biggest increase.

Forest Labs jumped 28 percent to $91.04. Actavis, the world’s second-largest generic-drug maker by market value, is buying Forest for about $25 billion in a deal that will transform it into a developer of brand-name drugs. Actavis rallied 5 percent to $201.47.

The deal is a win for billionaire investor Carl Icahn, Forest’s second-largest holder who gained seats on the company’s board in 2012 and 2013, and pushed for a sale. It also comes after Comcast Corp. (Nasdaq: CMCSA) last week announced the year’s biggest deal, a $45 billion agreement to acquire Time Warner Cable Inc. (NYSE: TWC).

Other pharmaceutical companies also rallied Tuesday. Drug maker Mylan Inc. (Nasdaq: MYL) climbed 4.8 percent to a record $48.30, and Regeneron Pharmaceuticals Inc. (Nasdaq: REGN) added 2.7 percent to $332.78, also an all-time high.

Zynga Inc. (Nasdaq: ZNGA) increased 5.8 percent to $5.15. The social gaming company reached a 19-month high after King Digital Entertainment Plc, the maker of popular smartphone games including “Candy Crush Saga,” filed to raise $500 million in an initial public offering in the United States on Tuesday. The amount King Digital is seeking to raise is a placeholder used to calculate fees and may change.

J.M. Smucker Co. (NYSE: SJM) rallied 3.8 percent to $95.31 after being upgraded to overweight at Stephens Inc. The jam maker slumped 3.5 percent on Feb. 14 after forecasting a bigger sales decline than analysts had anticipated.

Coca-Cola fell 3.8 percent to $37.47 for the steepest drop in the Dow and its biggest loss since August 2011. CEO Muhtar Kent, facing slowing growth in emerging markets, said the company will pare supply and data-management costs and overhaul marketing programs to generate $1 billion in savings by 2016. Global sales volume rose 2 percent for the year and 1 percent for the quarter, less than the 4 percent annual and 3 percent quarterly growth reported a year ago.

D.R. Horton Inc. (NYSE: DHI) lost 1.3 percent to $23.31 and PulteGroup Inc. (NYSE: PHM) slid 1.2 percent to $19.79 as a gauge of homebuilder confidence declined by the most on record in February amid bad weather that hurt sales.

An S&P index of homebuilders slid 1 percent, with 10 of its 11 members declining. The National Association of Home Builders/Wells Fargo sentiment gauge slumped to 46 this month from 56 in January. Snowstorms last week from the South to the Northeast helped reduce homebuyer traffic to its slowest pace since April.

Purchases and sales expectations also declined as builder confidence deteriorated from coast to coast, signaling construction will contribute less to economic growth at the start of 2014.

-- Bloomberg contributed to this report.

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