U.S. Stocks Advance on Takeover Speculation overtakes Employment Report

May 4 (Bloomberg) -- U.S. stocks rose for a fourth day after a report that Microsoft Corp. wants to buy Yahoo Inc. spurred speculation takeovers will accelerate after $69.5 billion of announced deals this week.
Shares of Yahoo, owner of the most-visited U.S. Web site, soared after the New York Post reported that Microsoft, the world's biggest software company, hired Goldman Sachs Group Inc. to advise on a possible deal. Reuters Group Plc, the biggest publicly traded provider of financial data, said it received a takeover approach from an unidentified company.
Mergers and acquisitions have helped send the stock market toward its fifth straight week of gains. Stocks also gained after the Labor Department said the U.S. economy added a fewer-than- forecast 88,000 jobs last month, boosting odds the Federal Reserve will cut interest rates.
``M&A will continue through the year,'' said Andrew Seibert, who helps manage $900 million at Stewart Capital Management in Pittsburgh. ``There's a lot of liquidity and these companies are flush with cash. It's one of the drivers for the market.''
The Standard & Poor's 500 Index added 4.45, or 0.3 percent, to 1506.84 as of 10:06 a.m. in New York. The Dow Jones Industrial Average advanced 15.44, or 0.1 percent, to 13,256.82. The Nasdaq Composite Index increased 6.72, or 0.3 percent, to 2572.18.
Better-than-forecast gains in worker productivity and the U.S. services industry yesterday pushed the Dow average to a third straight record and the S&P 500 above 1500 for the first time since September 2000.
For the week, the S&P 500 has risen 0.9 percent, the Dow average has advanced 1.1 percent and the Nasdaq has increased 0.6 percent.
Profit Growth
So far, 401 members of the S&P 500, or 80 percent, have reported average first-quarter profit growth of 12 percent. Analysts have upgraded their estimates at least twice since the start of the earnings season. They now expect S&P 500 companies increased profits by 9.4 percent in the period.
The 88,000 increase in employment last month followed a 177,000 gain in March that was smaller than previously estimated, according to the Labor Department. The jobless rate rose to 4.5 percent from 4.4 percent, which matched a five-year low.
The report also showed that average hourly earnings grew at a rate that trailed economists' forecasts.
Yields on interest-rate futures declined as traders priced in a higher likelihood the Fed will lower its target for the overnight lending rate between banks this year. Policy makers meet next week to decide on interest rates.
About five stocks rose for every three that fell on the New York Stock Exchange. Some 115 million shares changed hands on the Big Board, 3.4 percent less than the same time a week ago.
Yahoo, Microsoft
Yahoo jumped $4.62, or 16 percent, to $32.80, while Microsoft slid 35 cents to $30.62. An agreement between the two companies would create a dominant force on the Internet and raise the combined companies' share of the search advertising market to 27 percent compared with 65 percent for Google Inc. The New York Post report cited unidentified bankers.
Tom Brookes, a Brussels-based spokesman for Microsoft, had no immediate comment on the report. David Sawday, a London-based spokesman for Yahoo, declined to comment, saying the company doesn't discuss market speculation.
Reuters American depositary receipts, each representing six shares, surged $15.09, or 26 percent, to $74.01. Shares of the 156-year-old company had jumped 8 percent before the statement on speculation about an offer from Thomson Corp., the Canadian owner of the Westlaw legal database and TradeWeb financial services.
Companies around the world have announced some $1.8 trillion in mergers and acquisitions this year, according to data compiled by Bloomberg. Dealmaking totaled $3.68 trillion for all of last year.
Starbucks climbed 14 cents to $31.76. The world's largest chain of coffee shops said second-quarter net income increased to 19 cents a share from 16 cents a year earlier, matching analysts' estimates.
Crocs Inc. soared $11.27 to $68.68. The company said first- quarter earnings almost quadrupled as demand for the colorful line of casual shoes increased. Profit of 61 cents a share topped the 49-cent average estimate from analysts surveyed by Bloomberg.
Kodak Drops
Eastman Kodak Co., the world's largest photography company, dropped 54 cents to $25.43 after posting a wider-than-expected first-quarter loss as it spent to eliminate jobs and shut factories. The net loss of 53 cents a share compared with analysts' projections of a 3-cent loss.
Sears Holdings Corp. declined $7.03 to $181.29. The largest U.S. department-store company said first-quarter domestic same- store sales dropped 2.4 percent as consumers bought fewer home appliances because of a slowing U.S. housing market and increased competition.