Stocks gain on Wal-Mart profits, deal talk

Reuters

Posted at Aug 18 2010 06:37 AM | Updated as of Aug 18 2010 02:37 PM

NEW YORK  – Stocks rose on Tuesday after earnings from Wal-Mart and Home Depot and a $39 billion takeover bid in the agriculture sector bolstered confidence in the corporate outlook.

The two retailing giants reported profit that topped expectations, buoying the Dow industrials.

Wal-Mart Stores Inc was up 1.9% at $51.38 and Home Depot Inc gained 4.8% to $28.69.

"There has been a tug of war between weak economic data and strong corporate results. Today, the earnings finally won," said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in New Jersey.

Economic data was mixed. Industrial production rose and wholesale prices rose, allaying some fears of deflation, but housing starts suggested that sector remains weak. Most economic data in recent weeks have portrayed a slowdown in the recovery, driving investors away from equities.

The materials sector handily outperformed the broad market after BHP Billiton Ltd made an unsolicited $39 billion takeover bid for Potash Corp of Saskatchewan Inc. The world's largest fertilizer maker rejected the offer as inadequate.

Potash's US-traded stock surged 27.7% to $143.17. Fertilizer producer CF Industries jumped 4.7% to $88.53 after Goldman Sachs upgraded the stock, while the materials sector gained 2.3%.

"The increase in M&A shows CEO's and CFO's have more confidence in the outlook for the economy and are willing to start to deploy some of the high cash balances, which have built up in recent months," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.