US markets end higher on Berkshire-Burlington deal

US markets end higher on Berkshire-Burlington deal

New York: The S&P 500 and Nasdaq rose slightly on Tuesday as news of a major railroad acquisition helped sentiment, but the Dow edged lower on caution before a Federal Reserve statement on interest rates and the economy.

Morgan Stanley’s downgrade of semiconductor stocks also limited a broad advance.

The Dow Jones Transportation Average rose 5.3% as Warren Buffett’s Berkshire Hathaway agreed to buy Burlington Northern Santa Fe Corp in a deal that values the railroad company at $34 billion, Berkshire’s biggest deal ever. Burlington shares jumped 27.5% to $97.

“One of the themes we’ve been pointing toward is that the next catalyst after earnings is M&A activity, and we’ve had some big ones," said Tim Smalls, head of US stock trading at brokerage firm Execution LLC in Greenwich, Connecticut. “People consider companies to be cheap."

The Federal Open Market Committee began a two-day meeting on Tuesday. While investors expect the Fed to leave rates close to zero, they are nervous to hear what the officials say about the economic outlook.

The Dow Jones industrial average slipped 17.53 points, or 0.18%, to end at 9,771.91. But the Standard & Poor’s 500 Index added 2.53 points, or 0.24%, to finish at 1,045.41. The Nasdaq Composite Index advanced 8.12 points, or 0.40%, to close at 2,057.32.

The S&P is up 55% since its early March lows, partly because of stronger-than-expected economic data.

Semiconductors ranked among the major decliners after Morgan Stanley downgraded the sector to “cautious" from “attractive," and cut its view on Dow component Intel Corp, saying inventories were beginning to creep up in the sector.

The PHLX semiconductor index lost 1.3%. Shares of Intel slid 2.7% to $18.50 on Nasdaq.

Even so, the Nasdaq eked out a gain as investors searched for bargains among tech shares that have suffered losses recently. The Nasdaq has been down five of the past eight sessions.

In other deal news, Black & Decker Corp shares jumped 31% to $62, a day after Stanley Works Inc said it struck a deal to buy the company. Stanley shares rose 10.1% to $49.69.

Higher oil prices helped lift the S&P 500, with the S&P energy sector index up 1.1%.

US oil futures shot up $1.47, or 1.88%, to settle at $79.60 a barrel. ConocoPhillips’ stock gained 1.5 percent to $50.75.

Shares of Black & Decker jumped 23.9% to $58.66, while shares of Stanley Works were up 4.8% at $47.30.

Data showed new orders received by US factories rose more than expected in September but had little impact on the broader market.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 18 to 11, while advancing stocks beat decliners on the Nasdaq, by about 8 to 5.