U.S. Stocks Advance, Led by Merck, Drugmakers; SLM Shares Climb

April 13 (Bloomberg) -- The U.S. stock market posted its first back-to-back weekly gains since January on earnings that topped analysts' estimates and speculation takeovers will accelerate.
Merck & Co. led a rally in health-care shares, enabling the Standard & Poor's 500 Index to recoup all its losses from the Feb. 27 global equities rout, after the drugmaker's first-quarter profit beat projections. SLM Corp., known as Sallie Mae, jumped the most since at least 1983 on a report buyout firms may purchase the biggest U.S. provider of student loans for more than $20 billion.
Health-care and financial shares together made up three- quarters of the S&P 500's gain. First-quarter earnings among S&P 500 companies probably rose 3.1 percent, according to data compiled by Bloomberg.
``Earnings estimates on Wall Street are probably underestimating actual results,'' said Michael Vogelzang, who helps manage $2.4 billion in assets as chief investment officer at Boston Advisors in Boston. Meanwhile, ``if the market gets sloppy, we know private equity will go crazy buying stocks.''
The S&P 500 increased 5.05, or 0.4 percent, to 1452.85. The Dow Jones Industrial Average climbed 59.17, or 0.5 percent, to 12,612.13, leaving it 21 points shy of wiping out its Feb. 27 losses. The Nasdaq Composite Index added 11.62, or 0.5 percent, to 2491.94, helped by a surge in Cisco Systems Inc. shares.
Stocks yesterday resumed their April rally as takeover speculation and higher oil prices buoyed health-care and energy companies. For the week, the S&P 500 gained 0.6 percent, the Dow rose 0.4 percent and the Nasdaq advanced 0.8 percent.
Flagging Confidence
Benchmark indexes dipped briefly today after a private report showed a bigger-than-forecast drop in consumer confidence.
American consumers lost confidence in April for the third month in a row as they paid more for food and fuel. The Reuters/University of Michigan's preliminary index of sentiment declined to 85.3 in April from 88.4 a month earlier. Economists forecast a reading of 87.5.
Separately, a government report showed prices paid to U.S. producers rose more than forecast in March, led by a jump in energy costs. Prices rose 1 percent after a 1.3 percent gain in February. Economists surveyed by Bloomberg expected a 0.7 percent increase. So-called core prices, which exclude fuel and food, were unchanged, the Labor Department said.
Treasuries fell after the report, while the dollar strengthened against the yen. Oil prices fell because of surging inventories in Oklahoma.
Inflation
In minutes released this week from policy makers' last meeting, the Federal Reserve said faster inflation may necessitate an increase in borrowing costs.
More than seven stocks rose for every four that declined on the New York Stock Exchange. Some 1.4 billion shares changed hands on the Big Board, 11 percent less than this year's average.
Merck jumped $3.85 to $50.21. The 8.3 percent surge represents the biggest advance since February 2005 and gave Merck the best performance in the Dow average.
The drugmaker said first-quarter earnings increased to 78 cents a share, or 34 percent more than forecast, because of higher sales across its product lines. Separately, Merck won dismissal of federal securities lawsuits claiming the company defrauded investors before withdrawing its Vioxx painkiller from the market in September 2004.
Pfizer Inc., which is scheduled to report earnings on April 20, added 21 cents to $26.67. Schering-Plough Corp., which reports the day before, soared 97 cents to $27.94.
Bristol-Myers
Bristol-Myers Squibb Co. jumped 77 cents to $28.32. The company's Baraclude drug suppresses the hepatitis B virus in patients who resume treatment with the medicine after stopping therapy, according to a study.
Health-care shares as a group climbed 1.3 percent, bringing their advance in April to 5 percent.
``These dinosaur names like Pfizer and Merck and Schering- Plough have turned in a great month,'' said Walter ``Bucky'' Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. ``There's the potential for these companies to start making strategic acquisitions. That could put some growth back into these companies'' too.
The Nasdaq erased its losses after Cisco, the world's biggest maker of computer-networking equipment, said orders continue to pick up as customers upgrade their networks. Chief Development Officer Charlie Giancarlo said the company is also benefiting from growth in emerging markets and Europe. Cisco shares added 71 cents to $26.68.
McDonald's, GE
In other earnings news, McDonald's Corp. gained $1.01 to $47.64. First-quarter profit at the world's largest restaurant company beat analysts' estimates after March sales in Europe jumped the most in at least 13 years. Preliminary net income rose to 62 cents a share, 5 cents more than the average analyst estimate in a Bloomberg survey.
General Electric Co. increased 20 cents to $35.38 after first-quarter net income climbed 8 percent on commercial loans and international sales of power-plant and aviation equipment. Profit from continuing operations was 44 cents a share last quarter, matching the average analyst estimate.
SLM, known as Sallie Mae, jumped $6.01, or 15 percent, to $46.76. Blackstone Group may be a bidder for the company, the New York Times reported, citing unidentified people who had been briefed on the discussions. Blackstone spokeswoman Sophia Harrison in London declined to comment. SLM spokesman Tom Joyce refused to confirm or deny the report.
``There's insatiable demand with literally billions of dollars sitting on the sidelines to buy underperforming, inexpensive companies,'' said Vogelzang.
Apple Drops
Apple Inc. fell $1.95 to $90.24 after delaying the release of its new Macintosh operating system to ensure the iPhone makes its debut in June. The update to its Mac operating system will be pushed back to October, Apple said in a statement.
Intel Corp., the world's biggest semiconductor company and a supplier to Apple, slipped 4 cents to $20.46.
The delay is likely to lead to lower Macintosh sales in the next two quarters as the software, called Leopard, misses the important back-to-school season, Sanford C. Bernstein & Co. analyst Toni Sacconaghi wrote in a note to clients. Sacconaghi is the top-ranked computer analyst in Institutional Investor magazine's annual survey.
The Russell 2000 Index, a benchmark for companies with a median market value of $671 million, advanced 0.5 percent to 819.38. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 0.4 percent to 14,736.44. Based on its gain, the value of stocks increased by $67.6 billion.