US stocks: Market gains, Dow and S&P 500 at new '05 highs

NEW YORK - US stocks rose on Tuesday, pushing the Dow and S&P 500 to fresh 2005 highs, as retail shares got a boost from better-than-expected January retail sales, while an unsolicited bid for Circuit City Stores Inc. raised hopes for more M&A activity to come.

Shares of struggling electronics retailer Circuit City jumped 16.2 per cent, or US$2.30, to US$16.53 after receiving a US$3.25 billion unsolicited takeover offer from Highfields Capital Management LP, a private investment firm.

M&A activity, in addition to sparking talk about which other companies could be targeted, is positive for stocks as it indicates a general confidence in the economy.

The Dow Jones industrial average was up 46.19 points, or 0.43 per cent, to finish at 10,837.32. The Standard & Poor's 500 Index was up 3.98 points, or 0.33 per cent, to end at 1,210.12. The Nasdaq Composite Index was up 6.30 points, or 0.30 per cent, to close at 2,089.21.

The Dow and the S&P 500 closed at their highest points for 2005.

"Retail sales helped," said Stephen Carl, principal and head of US equity trading at The Williams Capital Group LP. "They fell, but they were above consensus. Any tidbit of good news is going to fuel things. "

Overall US retail sales dipped 0.3 per cent in January as automobile sales fell sharply, but purchases outside the volatile car sector gained a healthy 0.6 per cent, a government report showed on Tuesday.

Shares of retailers gained, with Wal-Mart Stores Inc., a Dow component, climbing 1.1 per cent, or 55 cents, to US$52.70. The Standard & Poor's index of retailers rose 0.68 per cent.

Advances in 3M Co. also helped lift blue chips, a day after the diversified manufacturer said it would boost its dividend 17 per cent. The stock was up 1.6 per cent, or US$1.38, at US$85.99. United Technologies Corp., another Dow stock, rose 1.5 per cent, or US$1.47, to US$102.77.

Tech shares got a lift from a 4.5 per cent gain in Apple Computer Inc., the maker of the iPod portable music player. The stock rose US$3.78 to US$88.41 on Nasdaq after brokerage Merrill Lynch raised its 12-month price target to US$102 from US$85. Earlier, the stock hit a fresh all-time high of US$89.08.

Cable companies' shares rose following positive comments from Banc of America Securities. The brokerage firm said the cable sector should benefit from the recent spate of telecommunications consolidation.

Shares of Comcast Corp. rose 3.4 per cent, or US$1.05, to US$32.36 and the stock of Time Warner Inc. gained 1.4 per cent, or 25 cents, to US$18.10.

Meanwhile, investors were looking ahead to Federal Reserve Chairman Alan Greenspan's testimony to Congress on Wednesday and Thursday. What Greenspan says about the US economy and monetary policy will get extra scrutiny from investors as they search for clues about the Fed's thinking about inflation and the pace of future interest-rate increases.

"I think the market is so comfortable about what's coming out of the Fed, that maybe we need more of a shake-up, because I think we're in a groove in terms of expectations about what the Fed's going to do," said Owen Fitzpatrick, head of the US equity group at Deutsche Bank Private Wealth Management.

Overall, trading was active, with 1.53 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 2.1 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Advancers outnumbered decliners on the New York Stock Exchange by 6 to 5 while decliners outnumbered advancers by about 16 to 15 on Nasdaq.

- REUTERS