The $6.4 Billion Sausage Deal, Big Durable-Goods Orders, and More Stock Market Records

The three things you need to know on May 28.

May 27, 2014 at 11:00PM

Few things are better than a three-day weekend -- it's a great time to ignore work emails, work on your BBQ game (what's better than perfectly pink medium rare burger patties?), and hope Wall Street's in a good mood when you return to your slim-fit Brooks Brothers-suit lifestyle. Well, good news -- the stock market gods agreed -- the Dow Jones Industrial Average (DJINDICES:^DJI) rose 69 points Monday, and the S&P 500 reached its 12th record high of 2014.

1. Sausage-makers pursue $6.4B deal
It's an all-out food fight in the world of mergers and acquisitions. That's because Pilgrim's Pride (NASDAQ:PPC) served up an offer to buy food competitor Hillshire Brands (NYSE:HSH) for $6.4 billion. For all you vegetarians out there, Pilgrim's is a meat-processing giant (and subsidiary of a major Brazilian corporation), while Hillshire owns the Jimmy Dean sausages you toss in the microwave mid-hangover.

So what makes the meaty deal fishy? Just that Pilgrim's is partially making the offer to try to stop Hillshire's other deal. Earlier this month, Hillshire offered $4.3 billion to try to buy another food competitor, Pinnacle Foods, the maker of Birds Eye frozen vegetables (the ones you pass while walking by the grocery store's ice cream aisle).

The takeaway is that investors were pretty hungry for the deal, sending Pilgrim's stock up 1.7% Tuesday, while pumping Hillshire's up over 22%. Under the all-cash deal, Pilgrim would pay $45 per share, which was 22% above where Hillshire stock was trading on Friday. Now Hillshire execs are sitting on the deal, waiting to decide if they'll take a bite.

2. European stock index hits highest level since '08
Don't call it a comeback, but European stock markets came back Tuesday to reach their highest levels in over six years. The Stoxx Europe 600 index, which measure the prices of 600 huge European stocks, closed 0.2% higher Tuesday, matching the highest level since January 2008.

Greece's last bailout was ratified in February 2012. That was thousands of big fat Greek weddings ago. Fellow debt-diseased bailout nation Portugal successfully made a "clean exit" from its bailout earlier in the month. Also, European elections happened over the weekend, and while some nutjob extreme anti-European parties made big gains, the status-quo coalitions hung on in the big economies.
Is Europe walking on sunshine? Heck, no. Unemployment is still Great Depression-like high in some countries (Spain and Greece), and economic growth is difficult to find (except in Germany, which just cares about Germany). The reason stocks are up is international growth. European companies are making profits in foreign countries that aren't doing terribly, like the USA and China, and shareholders are happy with profits wherever they can get it. 

3. Military might powers "durable goods orders"
The number of the day is 0.8%. That's how much orders for "durable goods" jumped in April, according to the Commerce Department. Plus, March's reading was revised up to a hefty 3.6% gain, making it the strongest jump in the stat since November. Keep in mind that durable goods are big-ticket items meant to last more than three years (so picture cars, tractors, or anything major Mike Tyson would have in his backyard).

The takeaway is that the military helped power the rise. Orders for military hardware that you'd expect to see in a video game increased by the most in over a year and a half -- demand for defense aircraft surged over 13% during the month. To Wall Street, the continued monthly wins for such key products was a major positive sign for Team America's 2014 economic recovery, helping drive stocks up Tuesday.

  • More first-quarter earnings reports: Cracker Barrel, Michael Kors, Popeyes Louisiana Kitchen
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