US: Stocks fall; Rite Aid, Starwood surge on takeover talk

[NEW YORK] Shares of pharmacy chain Rite Aid and Starwood Hotels bolted higher on Tuesday on reports of possible takeover bids, but the broader market declined on mixed earnings and lackluster economic data.

The Dow Jones Industrial Average fell 41.62 points (0.24 per cent) to 17,581.43.

The broad-based S&P 500 dipped 5.29 (0.26 per cent) to 2,065.89, while the tech-rich Nasdaq Composite Index slipped 4.56 (0.09 per cent) to 5,030.15.

Rite Aid surged 42.6 per cent after the Wall Street Journal reported Walgreens Boots Alliance was in advanced talks to acquire its smaller rival for up to US$10 billion as soon as Wednesday. Walgreens Boots rose 6.4 per cent.

The Journal also reported that three Chinese firms were interested in bidding for hotel chain Starwood, valued by the market at about US$12 billion. Starwood shares jumped 9.1 per cent.

But economic data further diminished the chances the Federal Reserve will move on Wednesday to lift interest rates after a two-day policy meeting.

The Conference Board said an index of consumer confidence fell to 97.6 in October from 102.6 in September on a gloomier outlook for the economy.

New US durable goods orders fell for a second straight month in September, by 1.2 per cent, the Commerce Department said.

Dow member IBM lost 4.0 per cent as it disclosed that it is under investigation by US securities regulators over its accounting for revenue for transactions in the US and Britain. The tech giant said it was cooperating with the probe.

Large pharma companies gained after reporting earnings above analyst expectations: Merck added 1.1 per cent, Pfizer 2.4 per cent, and Bristol-Myers Squibb 3.5 per cent.

UPS lost 2.9 per cent as revenues for the third quarter of US$14.24 billion came in about US$200 million below analyst expectations. The company described the economic environment as "uneven".

Ford tumbled 5.0 per cent as third-quarter earnings per share came in at 45 cents, two cents below analyst expectations. Net income more than doubled to US$1.9 billion. An RBC Capital Markets note cited weaker results in the Asia Pacific markets as a reason for the earnings miss.

Cummins, which manufacturers diesel and natural gas engines, slumped 8.7 per cent as it announced it would cut up to 2,000 jobs due to the business slowdown. Sales are particularly bad in Brazil and China, the company said.

The yield on the 10-year US Treasury fell to 2.04 per cent from 2.06 per cent, while the 30-year declined to 2.86 per cent from 2.87 per cent Monday.

AFP