Wall St flat after strong rally

Shares in Southern Union jumped as the bidding war for the pipeline operator escalated while the wider markets remained relatively flat as investors paused for breath following the strongest rally for two years last week.

Shares in Southern Union were up 4.3 per cent to $42.10 after Energy Transfer Equity agreed to take over the Texas-based group in an $8.9bn deal – significantly more than the $7.9bn that it had agreed on last month.

The higher offer follows a bid two weeks ago by Williams, another natural gas group, designed to break up the already agreed deal.

Shares in Williams were down 0.2 per cent to $30.68 while ETE added 0.6 per cent to $44.93.

Elsewhere in the energy sector, Zion Oil & Gas tumbled 17.6 per cent to $4.86 after the oil-and-gas exploration company said on Friday that there was little chance a well in northern Israel contained commercially viable hydrocarbons.

But overall, the sector was up 0.5 per cent, one of the few to gain in a generally caution session, helped by a rise in the oil prices. Marathon Oil was up 3.4 per cent to $34.06 while Peabody Energy added 2.2 per cent to $60.69.

But this failed to prevent the S&P 500 edging lower, losing 0.1 per cent to 1,337.88 as investors worried about which direction the markets would now turn after the 5.6 per cent jump in the S&P last week – the best week of gains in the index for two years.

The index is now just 1.9 per cent away from a three- year high and is well above its 100-day moving average.

Financial stocks were some of the worst hit by these nerves, also hurt by news that Portugal’s credit rating had been cut to “junk” and that Citigroup had cut its price target on a number of regional banks.

Morgan Stanley was down 2.6 per cent to $23.15 while Comerica, a regional lender, lost 3 per cent to $34.32. The S&P financial index was down 0.8 per cent, paring some of the 5.9 per cent gains seen last week. The KBW banking index fell 1.2 per cent.

The industrial sector was the next worst performing in the session, not helped by news that factory orders had risen by less than expected in May.

Textron, the maker of Cessna aircraft and Bell helicopters, led the losses, falling 5 per cent to $22.74 while Cummins declined 1.6 per cent to $105.69.

The S&P industrial index was down 0.6 per cent, paring some of the 6.4 per cent gains last week.

But most of the remaining sectors on the S&P saw little movement and the Dow Jones Industrial Average was flat at 12,569.34. The Nasdaq Composite was up 0.4 per cent to 2,825.77.

This pause follows the best weekly gains in two years on both these indices last week.

The upswing came as the indices bounced up off their 200-day moving average and investors cheered a perceived improvement in the Greece situation.

The markets were also looking ahead to the earnings season, which starts next week and is expected to be relatively strong.

Analysts are expecting a healthy 11.9 per cent rise in earnings from the previous year for S&P 500 companies, according to data complied by Bloomberg. This would mark the seventh straight quarter of double-digit earnings growth for the index.

But despite an assumption that second-quarter earnings would be healthy, there is some concern that guidances for the full year will be lowered due to the “soft patch” in the US economy over the past two months.

Uri Landesman, president of Platinum Partners, argued that the S&P 500 will reach a ceiling at 1,350 before running back down to 1,250 again in the coming months, thanks partly to lower guidances.

But he goes on to argue that there will be a late rally towards the end of the year, which will see the S&P finish between 1,370 and 1,400. “In the end, the market wants to go up,” he reassured.

In other company news Ameron surged 28.3 per cent to $85.05 after National Oilwell Varco said it would buy the fibreglass pipe manufacturer in a deal valued at $772m. National Oilwell Varco was up 2.2 per cent to $80.02.

Netflix led the gains on the S&P 500, jumping 8.1 per cent to $289.63 after saying that it was expanding its video streaming service to 43 countries in Latin America and the Caribbean.

Immucor, the biotechnology company, added 30.2 per cent to $26.99 after agreeing to be bought by private equity group TPG Capital for a fully diluted equity value of $1.97bn.

Baidu, the US-listed Chinese search engine, was up 1.8 per cent to $145.87 on news that it will team up with Microsoft to create an English-language search.