* 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 0.5 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 and Dow industrials hover near
Equities have resisted a pullback as investors use dips in
stocks as buying opportunities. The S&P 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 9.4 percent to $5, pulling
back from earlier highs after a person familiar with the matter
said the No. 2 U.S. office supply retailer was in advanced talks
to merge with smaller rival OfficeMax Inc. A deal could
come as early as this week.
OfficeMax jumped 20 percent to $12.94 while larger rival
Staples Inc shot up 9.4 percent to $14.17 as the best
performer on the S&P 500.
More than $158 billion in deals has been announced thus far
in 2013. Last week, agreements included the acquisition 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 37.81 points,
or 0.27 percent, at 14,019.57. The Standard & Poor's 500 Index
was up 6.84 points, or 0.45 percent, at 1,526.63. The
Nasdaq Composite Index was up 9.39 points, or 0.29
percent, at 3,201.42.
U.S. markets were closed on Monday for the Presidents Day
Health insurance stocks tumbled, led by a 7 percent drop in
Humana Inc to $72.50 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 1.7 percent to $56.37the
biggest drag on the Dow. The Morgan Stanley healthcare payor
index dropped 1.6 percent.
Express Scripts rose 2.4 percent to $56.87 after
the pharmacy benefits manager posted fourth-quarter earnings.
Wall Street's strong start to the year for 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 take effect.
Ahead of the debate over the cuts, known as sequestration,
further gains for stocks may be difficult to come by.
"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.
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.