How Buffett Bolstered Stocks Today


Before the opening bell this morning, it appeared as if stocks would be considerably lower today. That is, until Warren Buffet, the acclaimed chairman and CEO of Berkshire Hathaway , burst onto the scene, announcing his decision to team up with Brazilian investment firm 3G Capital in purchasing H. J. Heinz at a 20% premium to yesterday's close. Blue chips rallied on the news, putting the Dow Jones Industrial Average within 10 points of breakeven as of 2:45 p.m. EST.

Jobless claims and other news
The Department of Labor reported today that jobless claims for the week ended Feb. 9 decreased by 27,000 to a seasonally adjusted 341,000. According to The Wall Street Journal, the results beat economists' expectations of 360,000 new unemployment claims.

The improvement left analysts wondering whether or not last week's major snowstorm influenced the numbers. As an economist at JPMorgan Chase put it in a research note to clients: "There was a major snow storm at the end of last week which could have affected the claims data, though it is unlikely that the states that were affected by the storm accounted for all of the most recent decline."

In terms of corporate news, other than Berkshire's purchase of Heinz, the biggest headline today concerns the consummated merger of US Airways and American Airlines. The boards of both companies have now voted to approve the deal, paving the way for the nation's largest airline. Under the agreement, stakeholders in US Airways will get a 28% stake in the combined company, while American Airlines will take 72%.

With respect to Dow stocks, Alcoa is the best-performing component, up 2% in afternoon trading. As my colleague Dan Dzombak observed, it was announced earlier today that China's state-owned enterprise CITIC Group has taken a 13% stake in Australia's Alumina, which has strong operational ties with Alcoa.

Conversely, the worst-performing stock on the blue-chip index is Coca-Cola , which is down by 1.2% at the time of writing. The soda giant has struggled since reporting earnings earlier in the week. While it met analyst estimates on the bottom line, recording adjusted earnings of $0.45 per share versus the consensus estimate of $0.44 per share, it nevertheless came up short on the top line with $11.5 billion in quarterly revenue. As fellow Fool Blake Bos discusses in this video, the primary concern has been the erosion of Coke's gross margin due to higher commodity costs.

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John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway, Coca-Cola, and H. J. Heinz Company. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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