* S&P 500 enjoys longest winning streak since January 2011
* Office Depot, OfficeMax in merger talks - source
* Health insurer shares fall on proposed gov't payment rates
* Indexes up: Dow 0.3 pct, S&P 0.4 pct, Nasdaq 0.3 pct
By Ryan Vlastelica
NEW YORK, Feb 19 (Reuters) - U.S. stocks rose on Tuesday as
merger activity suggested the market could offer investors still
more value even as the S&P 500 index and Dow industrials hovered
near five-year highs.
Equities have resisted a pullback as investors use dips in
stocks as buying opportunities. The S&P 500 is up about 7
percent so far in 2013 and has climbed for the past seven weeks
in its longest weekly winning streak since January 2011, though
most of the weekly gains have been slim.
Office Depot Inc surged 18 percent to $5.41 after a
person familiar with the matter said the No. 2 U.S. office
supply retailer is in advanced talks to merge with smaller rival
OfficeMax Inc. A deal could come as early as this week.
OfficeMax jumped 26 percent to $13.56 while larger rival
Staples Inc shot up 12.5 percent to $14.56 as the best
performer on the S&P 500.
More than $158 billion in deals have been announced thus far
in 2013. Last week, deals were reached for the acquisiton of
H.J. Heinz Co by Berkshire Hathaway and the
sale by General Electric of its remaining stake in
NBCUniversal to Comcast Corp.
"Equity investors have to be encouraged by M&A since if the
number crunchers are offering large premiums, that shows how
much value is still in the market," said Mike Gibbs, co-head of
the equity advisory group at Raymond James in Memphis,
The Dow Jones industrial average was up 45.65 points,
or 0.33 percent, at 14,027.41. The Standard & Poor's 500 Index
was up 6.14 points, or 0.40 percent, at 1,525.93. The
Nasdaq Composite Index was up 9.33 points, or 0.29
percent, at 3,201.36.
U.S. markets were closed on Monday for the Presidents Day
Health insuer stocks tumbled, led lower by a 7.6 percent
drop in Humana Inc to $72.09 after the company said the
government's proposed 2014 payment rates for Medicare Advantage
participants were lower than expected and would hurt its profit
UnitedHealth Group lost 2.1 percent to $56.08 as the
biggest drag on the Dow. The Morgan Stanley healthcare payor
index dropped 1.6 percent.
The strong start to the year for Wall Street was fueled by
stronger-than-expected corporate earnings, as well as a
compromise by legislators in Washington that temporarily averted
automatic spending cuts and tax hikes that are predicted to
damage the economy.
The compromise on across-the-board spending cuts postponed
the matter until March 1, at which point the cuts will take
effect. Ahead of the debate over the cuts, known as
sequestration, further gains for stocks may be difficult to come
"If there's no major contention with sequestration, it looks
like stocks are prepared to handle it, but until then we'll
probably stay in a consolidation period marked by sideways
trading with a slow rate of ascent," said Gibbs.
Economic data showed the NAHB/Wells Fargo Housing Market
index unexpectedly edged down to 46 in February from 47 in the
prior month as builders faced higher material costs.
Express Scripts rose 2.6 percent to $57 after the
pharmacy benefits manager posted fourth-quarter earnings.
According to the Thomson Reuters data through Monday
morning, of the 391 companies in the S&P 500 that have reported
results, 70.1 percent have exceeded analysts' expectations,
compared with a 62 percent average since 1994 and 65 percent
over the past four quarters.
Fourth-quarter earnings for S&P 500 companies have risen 5.6
percent, according to the data, above a 1.9 percent forecast at
the start of the earnings season.