Russell falls as earnings lift Dow
The Russell 2000 (NYSE: IWM) was the only major U.S. index not to partake in the modest rally that followed news of major corporate deals. The small-cap index fell 0.82 points, or 0.10%, to 835.62. The Dow Jones Industrial Average (INDU) added 92.34 points, or 0.67%, to 13,943.42.
With a void of economic news, the bullish sentiment on Wall Street was primarily due to the latest mergers wave.
The Russell 2000 began the day with a healthy rise and briefly touched a level of 842 around 1 p.m. ET before slipping into negative territory shortly before the close.
Houston-based offshore driller GlobalSantaFe Corp. (NYSE: GSF) and city rival Transocean Inc. (NYSE: RIG) agreed to a merger of equals to create a $38 billion combined company. The deal is scheduled to close by the end of 2007.
Elsewhere, private investment firm Cerberus Capital Management LP will pay $4 billion in cash for equipment rental company United Rentals Inc. (NYSE: URI), according to a definitive merger agreement unveiled before the opening bell. The agreement allows Greenwich, Conn.-based United Rentals to solicit additional bids until Aug. 31.
Credit rating agency Fitch Ratings, Ltd. responded by saving that it is maintaining its “Rating Watch Negative” credit rating on the company’s debt. The rating was first placed on April 10, when United Rentals first announced that it is mulling a potential sale.
Meanwhile, shares of data center automation software products provider Opsware Inc. (Nasdaq: OPSW) shot up more than 30% on news that personal computers giant Hewlett-Packard Co. (NYSE: HPQ) said it would acquire the Sunnyvale, Calif.-based company for $1.6 billion. Hewlett-Packard will integrate Opsware into its software business and expects the deal to close before Oct. 31.
In earnings news, pharmaceutical giant Merck & Co., Inc. (NYSE: MRK) reported unexpectedly positive second-quarter results due to higher demand for cholesterol-lowering drug Vytorin and cervical-cancer vaccine Gardasil.
