U.S. stocks were little changed, after a two-day decline in the Standard & Poor’s 500 Index, as China eased restrictions on investing in banks and investors watched developments on budget negotiations in Washington.
Plains Exploration & Production Co. and McMoRan Exploration Co. surged at least 25 percent as Freeport-McMoRan Copper & Gold Inc. agreed to acquire them for about $9 billion. Citigroup Inc. gained 4.4 percent after announcing it will take a pretax charge of about $1 billion as part of a plan to eliminate more than 11,000 jobs. Apple Inc. dropped 3.3 percent, leading technology shares lower.
The S&P 500 fell less than 0.1 percent to 1,406.93 at 10:10 a.m. New York time. The Dow Jones Industrial Average added 36.52 points, or 0.3 percent, to 12,988.30. Trading in S&P 500 companies was 32 percent above the 30-day average at this time of day, according to data compiled by Bloomberg.
“The market is looking for any semblance of economic growth,” John Augustine, who helps manage $26.1 billion as chief market strategist at Cincinnati-based Fifth Third Bancorp, said in a phone interview. “Investors are weighing the growth prospects between China, Europe. U.S. Stocks are going to ebb and flow from day to day on those prospects. As Chinese leaders give support not only for relaxed standards in the financial sector but for overall economic growth next year, stocks are going to react to that.”
Chinese Regulators
China’s regulators abolished a rule limiting insurers’ investments in commercial banks. Companies in the U.S. added fewer workers in November than a month earlier after superstorm Sandy battered the East Coast and temporarily shuttered some businesses, according to ADP Research Institute.
The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which covers about 90 percent of the economy, rose to 54.7 in November from the prior month’s 54.2, the Tempe, Arizona-based group said today. Orders for equipment such as computers and electrical gear climbed in October by the most in eight months, indicating U.S. manufacturing is stabilizing heading into the looming fiscal cliff.
U.S. stocks fell yesterday, sending the S&P 500 lower for a second straight day, after President Barack Obama held his ground about raising tax rates for the highest-income Americans.
Plains Exploration jumped 25 percent to $45.08 and McMoRan Exploration rose 78 percent to $15.04. Freeport slumped 13 percent to $33.18. Freeport will pay about $50 a share in cash and stock for Plains, representing a takeover premium of about 39 percent based on the companies’ closing share prices yesterday, Phoenix-based Freeport said today in a statement. Holders of each McMoRan share will get $14.75 in cash and 1.15 units of a royalty trust.
Citigroup climbed 4.4 percent to $35.79. The plan will eliminate about 1,900 jobs in the institutional clients group, New York-based Citigroup said. It’s intended to “improve overall productivity in our markets business, especially in areas experiencing continued low profitability, such as cash equities,” the company said.
Travelers Cos. climbed 2.9 percent to $72.59. The insurer said superstorm Sandy will cost the company about $650 million after tax and reinsurance and it plans to resume share buybacks.
Cobalt International Energy Inc. jumped 12 percent to $26.71 after the company announced a “significant” oil discovery in the Gulf of Mexico.
Technology shares fell 1 percent among 10 groups in the S&P 500. Apple sank 3.3 percent to $556.72.
Facebook Inc.
Facebook Inc. dropped 0.1 percent to $27.43. The largest social-networking company will join the Nasdaq-100 Index next week. Facebook will replace Infosys Ltd. before the start of trading on Dec. 12, Nasdaq OMX Group Inc. said, about seven months after the company’s $16 billion IPO.
The waiting period for entry into the index was a negotiating point with Facebook as it considered listing on Nasdaq or the New York Stock Exchange, a person with knowledge of the matter said in April.
Nvidia Corp. slid 1.2 percent to $11.95. The maker of graphics processors was downgraded to market perform from outperform at Oppenheimer & Co. by equity analyst Richard Schafer.
Costco Options
Options to protect against losses in Costco Wholesale Corp. have slipped to the cheapest level in two years as traders bet shares of the largest U.S. warehouse club will extend gains from an all-time high amid rising profits.
Puts that pay should the shares fall 10 percent cost 5.35 points more than calls betting on a 10 percent rally, down from 8.94 in August 2011, according to three-month data compiled by Bloomberg. The price relationship known as skew reached the lowest since November 2010 last week. The stock has rallied 25 percent this year and closed at a record $104.59 on Dec. 3.
Chief Executive Officer Craig Jelinek has been keeping prices low to increase store visits amid an unemployment rate that’s stuck around 8 percent three years into the economic recovery. Costco, whose profit has climbed an average 16 percent in the past three fiscal years, last month announced a special dividend of $7 a share to return cash to investors.
“It’s a good business that still has ample room to grow,” Gary Bradshaw, a Dallas-based money manager at Hodges Capital Management Inc., which oversees about $800 million including Costco shares, said in a phone interview yesterday. “In tough times, people are more conscious about their spending. There is tremendous value at Costco. The special dividend shows management has confidence they will continue to grow earnings going forward.”
