New York Report: M&A activity lift shares near record levels

US STOCKS rose yesterday as this year's ongoing surge in merger activity suggested investors were still finding value in the market even as indexes closed in on all-time highs.

Office Depot Inc surged 9.4 per cent to $5.02 after a person familiar with the matter said the number two US office supply retailer was in advanced talks to merge with smaller rival OfficeMax Inc, which jumped more than 20 per cent.

The Dow industrials closed 0.9 per cent away from their record high while S&P 500 was 2.2 per cent off its peak.

“Deals are good for the market,” said Frank Lesh, a futures analyst and broker at FuturePath Trading. “The fact that they're being done is a positive.”

The Dow Jones industrial average gained 53.91 points, or 0.39 per cent, to 14,035.67. The Standard & Poor's 500 Index gained 11.15 points, or 0.73 per cent, to 1,530.94. The Nasdaq Composite Index gained 21.56 points, or 0.68 per cent, to 3,213.59.

Other stocks in the office supplies sector also rose. Larger rival Staples Inc shot up 13.1 per cent to $14.65 as the best performer on the S&P 500.

On the downside, health insurance stocks tumbled, led by a 6.4 per cent drop in Humana Inc to $73.01. The company said the government's proposed 2014 payment rates for Medicare Advantage participants were lower than expected and would hurt its profit outlook.

UnitedHealth Group lost 1.2 per cent to $56.66. The Morgan Stanley healthcare payor index dropped 1.2 per cent. Express Scripts rose 2.5 per cent to $56.98 after the pharmacy benefits manager posted fourth-quarter earnings. About two stocks rose for everyone that fell on the New York Stock Exchange (NYSE) and Nasdaq.

The VIX volatility index fell close to six-year lows.