S&P 500 rises to highest level in five years on merger optimism

Banks Rally

Nine out of 10 groups in the S&P 500 advanced, with consumer-staples and energy shares climbing at least 0.9%. The KBW Bank Index added 0.6%, as Bank of America gained 1.3% to $12.19. Citigroup jumped 1.4% to $44.43, poised for the highest closing level since May 2011, while JPMorgan Chase & Co. touched a more than four-year high after adding 1.1% to $49.41.

Office Depot, the second-largest office-supplies retailer, added 47 cents to $5.06 and OfficeMax rallied $2.23 to $12.98. The companies have discussed a stock swap that would create a single office-supply retailer to compete with Staples Inc., said the person familiar with the matter, who asked not to be identified because the talks remain private. Office Depot has explored options since September, when activist fund Starboard Value LP became its largest shareholder.

Staples climbed 13% to $14.61.

Google Record

Google advanced $12.91 to $805.80, the highest since the company went public in August 2004. Google is benefiting as more advertisers place promotions on its website, buoyed by the growing number of users who access the service on smartphones and tablets.

Best Buy Co. gained 3.4% to $17.44 after Alan Rifkin, an analyst at Barclays Plc, raised the retailer of electronic goods to overweight, the equivalent of buy, from equal weight.

“We believe Best Buy is taking the necessary steps to improve operations by cutting costs out and driving efficiencies,” Rifkin wrote in a report today. “We are confident that management will work to defend share.”

General Mills Inc. added 1.8% to $45.39. The maker of Cheerios cereal said profit would rise at a high single-digit percentage rate in fiscal 2014 and reiterated its earnings forecast for this year. Analysts project an increase of 8% to $2.90 per share, according to the average of estimates compiled by Bloomberg.

Sealed Air Corp. jumped 11% to $21.44, the most since November 2008. The packaging manufacturer, based in Elmwood Park, New Jersey, posted fourth-quarter revenue of $1.98 billion, topping the $1.94 billion average estimate in a Bloomberg survey of analysts.

Homebuilder Stocks

An index of homebuilders dropped 1.2%, with nine of its 11 members declining. The National Association of Home Builders/Wells Fargo builder confidence index fell to 46 from January’s 47, a report from the Washington-based group showed today. The median forecast in a Bloomberg survey of 50 economists called for a rise to 48.

PulteGroup Inc. tumbled 1.7% to $19.96 and D.R. Horton Inc. lost 1.2% to $23.38.

Humana Inc. tumbled 6.2% to $73.17 for the biggest drop in the S&P 500. The second-biggest private Medicare insurer said the U.S. government’s preliminary Medicare Advantage payment rates were less than the company anticipated. The proposed rates also sent other insurers’ shares down. UnitedHealth Group Inc., the largest U.S. health insurance provider, fell 1.2%  to $56.63. Cigna Corp. lost 0.9% to $60.52.

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