Stocks rise to records amid small-cap rally, seals

It was another record-setting day Monday on Wall Street as stocks moved modestly higher and as small-cap shares rallied.

The Dow Jones industrial average gained 18.82 points to 16,943.10. The Nasdaq composite index added 14.84 points to 4,336.24, and the Standard & Poor’s 500 index was up 1.83 points to 1,951.27, capping its seventh record close in the past eight sessions.

The markets did a boost from the acquisition by Hillshire Brands Co. (NYSE: HSH) by Tyson Foods (NYSE: TSN) for $8.5 billion.

Tyson outbid Pilgrim’s Pride (Nasdaq: PPC) in the effort to buy the maker of Jimmy Dean products and Ballpark Franks.

Oil rose to a three-month high Monday, up $1.75 to $104.41 a barrel. Gold added $1.40 to $1,253.90 an ounce.

Family Dollar (NYSE: FDO) jumped 13 percent as a filing showed Carl Icahn has amassed a 9.4 percent stake.

Analog Devices (Nasdaq: ADL) jumped 5 percent after agreeing to buy a chipmaker for about $2 billion.

Idenix Pharmaceuticals Inc. (Nasdaq: IDIX) more than tripled after Merck & Co. (NYSE: MRK) agreed to buy the drugmaker for $3.9 billion.

Apple Inc. (Nasdaq: AAPL) traded at $93.70, reflecting a seven-for-one stock split.

The Russell 2000 index of small companies climbed 0.9 percent for a fourth day of gains.

About 5.3 billion shares changed hands on U.S. exchanges Monday, 15 percent below the three-month average.

The S&P 500 advanced 1.3 percent to a record 1,949.44 last week as the European Central Bank lowered interest rates and a report showed that the U.S. economy created more jobs than expected. The index has continued to climb to records even as the U.S. economy contracted for the first time in three years during the first quarter.

Federal Reserve officials are watching the labor market as they move to complete their bond-purchase program late this year and start considering the timing of the first interest-rate increase since 2006. Central-bank stimulus has helped propel the S&P 500 higher by as much as 188 percent from its bear-market low in March 2009.

The ECB’s stimulus sent European bond yields to all-time lows and helped boost the region’s equities to near the highest in six years.

The U.S. stocks benchmark has rebounded 7.5 percent since a sell-off in small-cap and Internet shares spread to the broader market, dragging the index to a two-month low in April. The measure trades at 16.5 times the projected earnings of its members, up from a multiple of 14.8 at the start of February.

Family Dollar jumped 13 percent to $68.62, the highest this year. Icahn and his affiliates bought 10.7 million shares and options for about $265.8 million, according to a June 6 regulatory filing.

The billionaire may push for operating changes and ask the company to explore strategic alternatives, as well as potentially seeking board seats, according to the filing.

Dollar General Corp. (NYSE: DG) rallied 7.4 percent to $62.25. Jefferies Group LLC raised its rating on the stock to buy from hold after Icahn’s purchase of Family Dollar shares. The move may lead to a merger with Dollar General, Jefferies said.

Dollar Tree Inc. (Nasdaq: DLTR) gained 0.7 percent to $55.50, a seventh straight gain that is the longest streak since November.

Hillshire jumped 5.3 percent to $62.06, while Tyson slid 6.5 percent to $37.50. Tyson has made a unilaterally binding offer of $63 a share for the maker of Jimmy Dean sausages and Ball Park hot dogs, it said in a statement. Pilgrim’s Pride Corp. dropped 6.7 percent to $24.51 after saying it withdrew a competing proposal.

Idenix Pharmaceuticals soared 229 percent to $23.79 after Merck said it would acquire the maker of experimental Hepatitis C drugs for $24.50 a share in cash, or about $3.85 billion. Merck, the second-biggest U.S. drugmaker, gained 0.2 percent to $57.94.

Gilead Science Inc. (Nasdaq: GILD), the developer of Sovaldi, a competing hepatitis C treatment, fell 4.1 percent to $79.01.

Analog Devices rose 5 percent to $55.31. The semiconductor manufacturer agreed to acquire Hittite Microwave Corp. (Nasdaq: HITT) for about $2 billion. The purchase price of $78 a share is 29 percent more than Hittite’s closing price on June 6. Hittite rose 29 percent to $77.90.

Morgan Stanley (NYSE: MS) added 0.1 percent to $31.98. The bank agreed to sell its stake in oil-transportation company TransMontaigne Inc. to NGL Energy Partners LP (NYSE: NGL) for $200 million as part of the bank’s effort to reduce capital used by the commodities business.

NGL added 2.2 percent to $42.86.

Apple shares climbed 1.6 percent to $93.70. The shares closed Friday at $645.57. Apple said on April 23 it was doing the split so shares would be available to a wider pool of investors.

— Bloomberg contributed to this report.

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