US stocks: Market edges up as deals offset oil

NEW YORK - US stocks rose on Thursday as news about acquisitions offset the impact of high oil prices, debt downgrades of automakers and cuts in stock ratings.

Johnson & Johnson lifted the blue-chip Dow average after the company said it won conditional approval from European competition authorities of its planned acquisition of heart device maker Guidant Corp Johnson & Johnson said it expects a decision in October from the US Federal Trade Commission on the deal. Its stock rose 0.5 per cent to US$62.53 and buoyed other health-care shares.

Automotive supplier Johnson Controls Inc said it will pay US$2.4 billion in cash for York International Corp, a maker of heating and cooling systems. York shares skyrocketed 36 per cent to US$56.79, while Johnson Controls rose 4.9 per cent to US$59.53, both on the New York Stock Exchange.

The Dow Jones industrial average ended up 15.76 points, or 0.15 per cent, at 10,450.63. The Standard & Poor's 500 index rose 2.78 points, or 0.23 per cent, to 1,212.37. The technology-laced Nasdaq Composite Index gained 5.46 points, or 0.26 per cent, to close at 2,134.37.

"We've had very good company news, both on earnings and on deal fronts," said Noah Blackstein, a portfolio manager at Dynamic Power American Fund in Toronto. "But demand for stocks has been faltering as the rise in oil prices accelerated."

Crude oil for October delivery settled at US$67.49 a barrel, up 17 cents, after earlier climbing intraday to a record US$68 per barrel. Oil prices rose late in the day on news that Gulf of Mexico operators were preparing to move non-essential rig personnel due to Tropical Storm Katrina.

Shares of Exxon Mobil Corp, the world's largest publicly traded oil company, gained 0.5 per cent, or 30 cents, to US$59.18, helping both the Dow and the S&P 500.

Among health-care stocks that climbed in sync with Johnson & Johnson were AmerisourceBergen, the No. 3 US drug distributor, up 3.4 per cent, or US$2.40, at US$72.74, and Forest Laboratories Inc, up 4.7 per cent, or US$2.01, at US$44.44, both in NYSE trading.

In other acquisition news, shares of Six Flags Inc shot up 11 per cent, or 72 cents, to US$7.26 on the NYSE after the theme park operator put itself up for sale on Thursday.

The Nasdaq's top percentage gainers included Coldwater Creek, a women's clothing retailer, up 18.2 per cent, or US$4.77, at US$30.92, a day after reporting better-than-expected earnings and revenue.

DOWNGRADES TAKE TOLL ON GM AND FORD

A debt downgrade helped push Dow component General Motors Corp lower. Moody's Investors Service cut its ratings on the debt of General Motors Corp. and its finance arm, General Motors Acceptance Corp., late on Wednesday.

GM shares fell 0.5 per cent, or 18 cents, to US$34.09.

For GM, the impact of the Moody's downgrade was partly offset by an announcement that the world's largest automaker is extending its popular program of employee discounts for everyone on vehicle sales.

Moody's also cut the debt of GM's rival Ford Motor Co to junk status after Wednesday's closing bell. Ford shares fell 1 per cent, or 10 cents, to US$9.82.

"Both GM and Ford already wear junk ratings by S&P, but the move nonetheless inspired stock sales," said Christopher Low, chief US economist at FTN Financial in New York. "The assumption is that a downgrade may signal further deterioration since the first junk ratings were announced."

In another downgrade, shares of Dow Chemical Co, the No. 1 US chemical maker, fell after analysts at Citigroup Inc. cut the rating on the company to "hold" from "buy," citing lower margins in the ethylene business.

Dow Chemical's shares fell 2.1 per cent, or 96 cents, to US$44.41. Analysts at Credit Suisse First Boston also cut estimates on Dow and other chemical stocks, saying rising oil and natural gas prices would pressure margins.

Trading was light on the New York Stock Exchange, where advancers beat decliners by a ratio of about 7 to 5, with about 1.2 billion shares changing hands, down from the 1.46 billion daily average for last year.

On Nasdaq, gainers outnumbered decliners by a ratio of about 8 to 7, with about 1.34 billion shares changing hands, down from the 1.81 billion daily average last year.

- REUTERS