M&A activity kicks off week driving S&P 500 towards record

Merger and acquisition activity dominated the start of the week for US equities, with the prospect of deals propelling the S&P 500 index within sight of a record high.

Shares of US oil and gas storage companies were in focus after pipeline operator Energy Transfer Equity confirmed that it had made a $48bn unsolicited offer for rival Williams Companies.

Williams, which operates large-scale natural gas infrastructure in the US, rejected the $64-a-share, all-stock offer, saying it significantly undervalued the company. But investors appeared to think a deal could get done, with shares in Williams surging 26 per cent to an all-time high of $60.90.

Speculation that a possible deal between ETE and Williams could spark a wave of consolidation in the oil and gas pipeline industry, boosted share prices for other companies in the sector.

Spectra Energy, a large pipeline operator, gained 1 per cent to $33.05, giving the company a valuation of more than $22bn. Oneok, a company that owns one of the country’s premier natural gas liquids systems, jumped 4 per cent to $40.79.

Merger and acquisition activities were not limited to the energy sector.

Health insurer Cigna climbed 5 per cent to $162.60 on hopes that rival Anthem could sweeten its $184-a-share bid for the company. Although Cigna has rejected the offer, which values the business at roughly $53bn, the company said it was open to a deal “under the right circumstances”.

Humana, the smallest of the main insurers, which has put itself up for sale in an auction that could fetch roughly $30bn, fell 6 per cent to $189.98 on reports that Aetna, the industry’s number three player, has made an approach.

Aetna shares were up 3 per cent at $128.07 while UnitedHealth Group, the market leader, remained unchanged at $120.25.

Fitbit continued to muscle its way higher. The maker of wearable fitness tracking devices extended its gains on its third day of trading, jumping 14 per cent to $37.06 after surging more than 50 per cent on its market debut last Thursday. The San Francisco-based company, along with selling stockholders, sold 36.6m shares in an initial public offering at $20 apiece last week.

Netflix, this year’s best performing stock on the S&P 500, was poised to close at a fresh high after analysts at BTIG raised its price target on the stock. Analyst Richard Greenfield boosted his price target on the stock from $600 to $950, the highest among analysts surveyed by Bloomberg. The stock rose 3 per cent to $675, putting it on track for its best close ever.

Elsewhere, the broader US equity market extended its bullish run from last week.

The S&P 500 rose 0.6 per cent to 2,122.85, putting the benchmark US index closer to the record intraday high of 2,134.72 reached in May. The Dow Jones Industrial Average was also 0.6 per cent higher at 18,119.78, while the technology heavy Nasdaq Composite hit another all-time high after advancing 0.7 per cent to 5,153.97.