U.S. stocks advanced, with benchmark indexes trading near all-time highs, as companies from Time Warner Inc. to Intel Corp. rallied amid deals and earnings reports.
Time Warner (NYSE: TWX) surged 17 percent as Rupert Murdoch’s 21st Century Fox Inc. made a takeover bid that was rebuffed. Intel (Nasdaq: INTC) gained 9.3 percent as its third-quarter sales forecast fueled optimism the personal-computer market is emerging from a two-year slump.
Standard & Poor’s 500 index added 0.4 percent to 1,981.55. The Dow Jones industrial average increased 77.33 points, or 0.5 percent, to a record 17,138.01. The Russell 2000 index of smaller companies fell 0.2 percent, after slumping 1 percent Tuesday amid Federal Reserve concerns over valuations.
Fed Chair Janet Yellen said asset valuations in general aren’t out of line with historical norms, after a central bank report Tuesday indicated prices for smaller social media and biotechnology companies are substantially stretched.
“I’m not seeing alarming warning signals,” Yellen said in response to questions from the House Financial Services Committee.
While some asset values “may be on the high side and there may be some pockets where we see valuations becoming stretched,” in general “price equity ratios and other measures are not outside of historical norms,” she said.
The S&P 500 has rallied 7.2 percent this year amid better-than-estimated corporate earnings and central bank stimulus. The U.S. economy is showing signs of recovering from a 2.9 percent contraction in the first quarter.
Data on Wednesday showed U.S. industrial production climbed 0.2 percent in June, capping the strongest quarter in almost four years.
The Federal Reserve said in its Beige Book business survey released Wednesday that economic growth was modest-to-moderate in the latest period as all 12 of its districts reported stronger consumer spending and expanded manufacturing.
Equity futures rose early in the day as a report showed China’s economic growth accelerated for the first time in three quarters. Gross domestic product rose 7.5 percent in the April-June period from a year earlier, beating the 7.4 percent median estimate in a Bloomberg News survey of economists.
Intel climbed 9.3 percent, the most in the Dow. The PC market has shown signs of improvement this year as corporate spending picked up and U.S. shipments returned to growth.
Intel’s outlook indicates demand is starting to recover among consumers, who may be buying laptops and desktops again after years of opting for smartphones and tablets instead.
Intel also added $20 billion to its stock-repurchase program, including $4 billion planned for the third quarter.
Time Warner surged 17 percent to $83.13 for the largest gain in the S&P 500. 21st Century Fox made an $80 billion takeover bid in recent weeks for Time Warner that was rebuffed, the New York Times reported, citing people briefed on the matter whom it didn’t identify.
Fox indicated that it would sell CNN to ward off potential antitrust concerns since Fox News competes directly with CNN, the newspaper said.
Fox confirmed the proposal. The company is prepared to offer more than $85 a share for Time Warner, according to a person with knowledge of the matter. Fox shares fell 6.2 percent.
International Game Technology (NYSE: IGT) jumped 9.1 percent. Rome-based Gtech SpA agreed to buy the world’s biggest slot-machine maker for $4.7 billion.
General Electric Co. (NYSE: GE) rallied 1.5 percent. The company is in talks with potential acquirers about selling its century-old household appliances business, said people familiar with the matter.
“This [mergers and acquisitions] just seems to have taken off, not that it was dead before, it just seems to be almost a daily event,” said Timothy Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, in a phone interview.
“A bid for something like Time Warner, that’s big news. A takeover environment creates a lift to the markets. Everyone is looking for the next big name.”
The Russell 2000 has fallen 1.2 percent Monday and Tuesday, erasing its gain for the year after the Fed said valuations for smaller social-media and biotechnology companies are substantially stretched.
Small-caps and Internet shares were the biggest victims of a market retreat earlier this year as investors dumped the best performers of the bull market amid concern valuations advanced too far.