US stocks: Markets edge up as deals offset oil

NEW YORK - US stocks rose slightly on Monday as takeover moves in the oil and health-care industries more than offset a slight gain in oil prices and a drop in Merck & Co. Inc. after the drug maker lost a key court case over its product Vioxx.

The Dow average also got a lift from aircraft maker Boeing Co, up 1 per cent at US$67.79 after a Russian airline said it would buy some Boeing planes, as well as from consumer products company Procter & Gamble Co, up 1 per cent at US$55.16, and dominant chip maker Intel Corp., up 1.6 per cent at US$26.06.

State-owned Chinese oil company CNPC agreed to buy PetroKazakhstan Inc. for US$4.18 billion, in what would be China's first takeover of a foreign-listed energy company and the latest move in its push to secure more oil. That drove the American depositary receipts of PetroKazakhstan up 18.4 per cent to US$53.73 on the New York Stock Exchange.

In the health-care sector, OSI Pharmaceuticals Inc. said it would buy eye treatment maker Eyetech Pharmaceuticals Inc. Eyetech shares soared almost 30 per cent to US$18.13 and were among the Nasdaq's top percentage gainers. But OSI plunged nearly 22 per cent to US$31.92 and was the Nasdaq's biggest percentage loser.

The Dow Jones industrial average gained 10.66 points, or 0.10 per cent, to end at 10,569.89. The Standard & Poor's 500 index advanced 2.02 points, or 0.17 per cent, to finish at 1,221.73. And the technology-laced Nasdaq Composite Index rose 5.85 points, or 0.27 per cent, to 2,141.41.

"There's been some deals overseas, and the thinking is mergers beget mergers," said Neil Massa, senior trader at John Hancock Funds in Boston.

In another high-profile deal, Maytag Corp. and Whirlpool Corp. said they have signed a definitive merger agreement. The deal calls for Whirlpool to acquire Maytag for US$21 a share. Maytag's stock was down 0.1 per cent, or 2 cents, at US$18.69, after climbing as high as US$19 earlier. Whirlpool shares fell 0.4 per cent, or 35 cents, to US$81.48.

OIL PRICES LIMIT GAINS

But rising oil prices limited stocks' gains.

"Oil is putting a ceiling on stocks," said Sam Rahman, a portfolio manager at Baring Asset Management Inc. in Boston, with US$1.5 billion in stocks. "Until we see a considerable pullback in oil prices, demand for stocks will be hurt." US crude oil for September delivery rose 10 cents to settle at US$65.45 a barrel, after trading as high as US$66.25.

Every US$10 increase in a barrel of oil in a year may lead to a 0.5 per cent drop in US gross domestic product, according to data by Merrill Lynch & Co.

Energy companies' shares, however, rose in sync with oil prices and helped support both the Dow and the S&P 500. Exxon Mobil Corp, a Dow component, gained 0.4 per cent, or 25 cents, to US$59.07 on the NYSE. ConocoPhillips, an S&P 500 component, added 0.2 per cent, or 14 cents, to US$63.21.

But an index of retailers' stocks in the S&P 500 fell 0.2 per cent on concern that higher oil prices may hurt consumer spending in the year's second half, fund managers said.

MORE FALLOUT FROM MERCK RULING

Shares of Merck extended Friday's losses, slipping 0.6 per cent to US$27.89 on the New York Stock Exchange, making it one of the worst performers in the blue-chip Dow average. Merck was found liable for a death by a Texas jury on Friday in a case involving its painkiller, Vioxx. Merck said it would appeal the verdict.

The Merck verdict "could be a distraction for a long time," said Stephen Massocca, head of trading and president of Pacific Growth Equities in San Francisco. "It's going to be difficult for other drug companies that face litigation." Pfizer Inc., a drug maker and Dow component, fell 0.7 per cent, or 19 cents, to US$25.36, while the American Stock Exchange Pharmaceutical Index shed 0.08 per cent.

BOEING, P&G AND INTEL BOOST DOW

Boeing's stock rose almost 1 per cent, or 64 cents, at US$67.79 after Russian airline Aeroflot said it would replace Ilyushin-96-300's with Boeing and Airbus planes.

Shares of Procter & Gamble gained 1.1 per cent, or 62 cents, to US$55.16. A portfolio manager said in the financial weekly Barron's that shares of P&G, which is buying Gillette Co., are trading at a steep discount to their real value.

Intel, the world's largest chip maker, jumped 1.6 per cent, or 41 cents, to US$26.01. CNBC television said Monday that Research in Motion, the maker of the Blackberry email pager, has agreed to a joint development deal with Intel, pushing RIM shares up nearly 6 per cent, or US$4.21, to US$77.49 on Nasdaq.

Among other Nasdaq gainers, Northwest Airlines Corp. rose 5.2 per cent, or 28 cents, to US$5.66. The carrier has kept flying without major disruptions despite a strike by its mechanics.

Trading was light on the New York Stock Exchange, where advancers beat decliners by a ratio of about 7 to 4, with about 1.22 billion shares changing hands, down from the 1.46 billion daily average for last year.

On Nasdaq, advancers outnumbered decliners by a ratio of about 3 to 2, with about 1.40 billion shares changing hands, down from the 1.81 billion daily average last year.

- REUTERS