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Stocks Close Flat; Investors Cheer Deal News

NEW YORK (TheStreet) -- Major U.S. stock averages were little changed Thursday following an early selloff, as a number of high-profile corporate deals and better-than-expected jobs data bolstered risk appetite despite a stronger dollar and sour economic news from Europe and Japan.

The Dow Jones Industrial Average slipped 10 points, or 0.1%, to 13,973.

Breadth was negative, with losers outpacing winners 16 to 14. Cisco (CSCO), Wal-Mart (WMT), Coca-Cola (KO) and DuPont (DD) shares fell.

Cisco beat Wall Street's second-quarter earnings and revenue estimates. However, shares dropped 0.7%.

Alcoa (AA), JPMorgan (JPM) and Travelers (TRV) shares traded higher.

The S&P 500 tacked on 1 point to 1,521. The Nasdaq added 2 points to 3,199.

Most sectors in the broader market traded higher. The sharpest decliners included utilities and consumer cyclicals. Consumer non-cyclicals, conglomerates and basic materials were the largest gainers.

Volumes totaled 3.72 billion shares on the New York Stock Exchange and 1.92 billion on the Nasdaq. Advancers edged decliners by four issues on the Big Board, and by a 1.2-to-1 ratio on the Nasdaq.

In corporate deal news, H.J. Heinz (HNZ) shares surged 20% as the company agreed to be acquired by Berkshire Hathaway (BRK.A) and Brazil's 3G Capital in a transaction valued at $28 billion. Berkshire shares closed up 1%.

The merger of AMR (AAMRQ.PK) subsidiary American Airlines and US Airways (LCC) was formally announced Thursday. US Airways shares tumbled 4.6% and AMR shares soared 63%.

Cardinal Health (CAH) shares increased 1.2% as the health-care-services company announced plans to acquire privately held medical-supplies provider AssuraMed for $2.07 billion.

Peter Cardillo, chief market economist at Rockwell Global Capital, said the deals are a good sign as far as the market is concerned.

"Any time you get a string of deals almost on weekly basis, that's an affirmation of good prospects ahead in terms of economic activity," he said. "When the economy is poised to grow, you don't downsize. When the economy is poised to just muddle along, you don't increase, you decrease."

JJ Kinahan, chief derivatives strategist at TD Ameritrade, said options traders this week are also "most assuredly" paying attention to options expiration day on Friday.

"We still do get some movement (particularly in underlying indexes such as SPX) on expiration Thursday and Friday so that is something to definitely watch," Kinahan said. He added that the 1,525 level in the SPX is where traders will start to see resistance and the market may have trouble climbing through. He noted that the SPX was positive Wednesday with a positive VIX and he did see traders purchasing options with the thought that they could see a temporary breather in the S&P over the next two days.

European markets were retreating after Eurostat, the statistics office of the European Union, said flash estimates show that gross domestic product fell by 0.6% in the euro area during the fourth quarter of 2012 compared with the previous quarter.

The FTSE in London closed down by 0.5% Thursday and the DAX in Frankfurt slid 1.1%.

"The weakness in Q4 ... reflects a number of special or calendar-related factors that may quickly be reversed," said Michel Martinez, an economist at Societe Generale.

Martinez said much of the decline appeared to be related to the impact of the three-point VAT increase in Spain at the start of September, which resulted in "consumption switching effects" between the third and fourth quarters that were felt across Europe, particularly in the car sector.

Martinez said the decline in Italy was especially weak and probably continues to reflect the weakness in real disposable income, which Martinez estimated declined by around 5% year-over-year in the fourth quarter. Elsewhere, poor weather in December also had a pronounced effect on construction, especially in Germany, the economist added.

The Labor Department reported Thursday that initial jobless claims for the week ended Feb. 9 were 341,000, a decrease of 27,000 from the previous week's upwardly revised figure of 368,000. The four-week moving average was 352,500, an increase of 1,500 from the previous week's average of 351,000.

Continuing claims for the week ended Feb. 2 were 3.114 million, a decrease of 130,000 from the preceding week's 3.244 million.

Economists were expecting jobless claims of 365,000 and continuing claims of 3.2 million.

The Nikkei in Japan finished up 0.5% Thursday as upbeat company earnings offset profit-taking on financial stocks. Data on Thursday showed that the Japanese economy contracted for a third straight quarter in the three months to December. However, the Bank of Japan raised its assessment on Japanese economic conditions and said the economy is bottoming.

The Hang Seng index settled up 0.85% as the Hong Kong market re-opened after the lunar new year holiday.

Gold for April delivery fell $9.60 to settle at $1,635.50 an ounce at the Comex division of the New York Mercantile Exchange, while March crude oil futures added 30 cents to close at $97.31 a barrel.

The benchmark 10-year Treasury soared 2 1/32, pushing the yield down to 2.004%.

The dollar was popping 0.41%, according to the U.S. dollar index.

Automaker General Motors (GM) posted fourth-quarter earnings of 48 cents a share on revenue of $39.3 billion, versus the average estimate of 51 cents a share on revenue of $39.14 billion amid ongoing weakness in its European segment. Shares fell 3.2%.

Whole Foods (WFM), the organic grocery chain, said Wednesday that fiscal first-quarter profit rose 24% as revenue jumped almost 14%.

Whole Foods narrowed its revenue forecast and said its earnings growth may slow through the remainder of the fiscal year. Shares tumbled 9.7%.

PepsiCo (PEP) shares rose 1.1% after the food-and-beverage giant posted fourth-quarter earnings of $1.09 a share on revenue of $19.95 billion, beating analysts' earnings estimates of $1.05 a share on revenue of $19.7 billion. The company said PepsiCo Americas Foods saw organic revenue grow 8% in the quarter, driven by organic sales gains in all divisions including Latin America. U.S. market share trends for Frito-Lay North America and PepsiCo Americas Beverages improved sequentially in the fourth quarter.

The company also announced a quarterly dividend increase of 5.6%, starting in June.

CBS (CBS) posted fourth-quarter earnings of 60 cents a share on revenue of $3.61 billion. Consensus among analysts expected 69 cents a share after the market close. Shares inched up 0.6%, but were falling 1.3% in after hours.

Weight Watchers International (WTW) shares dove 17% as the company predicted full-year profit below analyst targets, explaining that its marketing strategy has not been sufficient amid stiff competition.

CenturyLink (CTL) shares plunged 23% after the company reduced its dividend by 26% and the stock was downgraded by analysts.

-- Written by Andrea Tse and Joe Deaux in New York.

>To contact the writer of this article, click here: Andrea Tse.

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