* Hillshire Brands shares soar after Pilgrim's Pride bid
* Pfizer's stock edges up after it ends AstraZeneca bid
* Small caps gain for fourth straight day
* Dow up 0.4 pct; S&P 500 up 0.6 pct; Nasdaq up 1.2 pct
(Updates to close)
By Chuck Mikolajczak
NEW YORK, May 27 U.S. stocks rose on Tuesday as
the S&P 500 scored a second straight record close, buoyed by the
latest round of merger activity and as expectations for rate
cuts by the European Central Bank stoked investors' appetite for
ECB chief Mario Draghi said on Monday the bank must be
"particularly watchful" for any negative price spiral in the
euro zone. His comments increased bets that the bank was ready
to cut rates next week to counter low inflation and weak lending
in the euro zone, keeping asset purchases as an option.
U.S. markets, which were closed Monday for Memorial Day, had
to digest the ECB news.
"(It's) a rate cut or some sort of nonconventional
stimulus," said Peter Cardillo, chief market economist at
Rockwell Global Capital in New York. "No question about it, we
had to catch up from yesterday."
The data also supported equities. Orders for durable goods,
which are U.S. manufactured goods meant to last three years or
more, unexpectedly rose in April, and consumer confidence perked
up in May, backing views of a rebound in economic growth.
"Durable goods was what came out early and that set a very
positive tone for the market, especially since the prior numbers
were revised sharply higher," said Tim Ghriskey, chief
investment officer of Solaris Group in Bedford Hills, New York.
"This is a lot of what the market has been talking about,
which is the industrial side beginning to spend on
infrastructure, whether it is public or private, and just the
industrial side kicking in."
The Russell 2000 and Nasdaq Composite
outperformed other major indexes on Tuesday, as they did handily
last week, indicating a rotation out of small caps and growth
shares could be over. The Russell rose 1.4 percent, its fourth
straight advance and sixth gain in the past seven sessions.
The Dow Jones industrial average gained 69.23 points
or 0.42 percent, to end at 16,675.50. The S&P 500
advanced 11.38 points or 0.60 percent, to 1,911.91, a record.
The Nasdaq Composite added 51.26 points or 1.22 percent,
Shares of Hillshire Brands, known for sausages and
lunch meats, surged 22.1 percent to $45.19 after poultry
producer Pilgrim's Pride offered to buy Hillshire in a
$6.4 billion deal. Shares of Pinnacle Foods
, which Hillshire plans to buy, slid 5.4 percent to
$31.48. Pilgrim's Pride gained 1.7 percent to $25.52.
Pfizer shares added 0.4 percent to $29.61 a day
after the U.S. drugmaker walked away from its bid to buy
AstraZeneca for nearly 70 billion pounds ($118 billion).
U.S.-traded AstraZeneca shares dipped 0.3 percent to
Volume was light, with about 5.38 billion shares traded on
U.S. exchanges, short of the 5.8 billion average so far this
month, according to data from BATS Global Markets.
Advancing stocks outnumbered declining ones on the New York
Stock Exchange by a ratio of 2 to 1, while on the Nasdaq, nearly
three stocks rose for every one that fell.
(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)