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Economy

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At a glance
On Tuesday
•Dow dropped 8.99 points, or 0.1 percent, to close at 15,967.03
•S&P 500 index fell 3.66 points, or 0.2 percent, to 1,787.87
•Nasdaq composite declined 17.51 points, or 0.4 percent, to 3,931.55
For the week
•Dow rose 5.33 points, or 0.03 percent
•S&P 500 index fell 10.31 points, or 0.6 percent
•Nasdaq composite declined 54.42 points, or 1.4 percent
For the year
•Dow is up 2,862.89 points, or 21.9 percent
•S&P 500 is up 361.68 points, or 25.4 percent
•Nasdaq is up 912.04 points, or 30.2 percent

Corporate deals in doldrums despite stock revival

– A surging stock market usually comes with a boom in corporate deal-making.

But deals are lagging this year, even as the market notches a series of record highs and is headed for its best year in a decade.

Deal levels are sluggish for a number of reasons. The U.S. economic recovery has been slow and unsteady. Investors are concerned that growth could falter if the Federal Reserve withdraws its huge stimulus program too quickly. Stock valuations are getting pricier. There are also fears of more budget fights in Washington and a possible default by the U.S. government.

“If you’re an investor, a C-Suite executive trying to make a big bet, you’re probably going to be more cautious,” said Richard Jeanneret, who advises companies on mergers and divestitures as a member of the Americas executive board at EY, the global consultancy firm formerly known as Ernst & Young.

The value of U.S. deals announced through the first nine months of 2013 was 33 percent below the same period in 2007, when the stock market was also marching toward an all-time high and deals surged.

Mergers and acquisition totaled $761 billion through September, compared with $1.1 trillion over the same stretch in 2007.

Executives are also holding back because they see stocks becoming more expensive relative to earnings.

Companies in the S&P 500 index have an average price-earnings ratio – a measure of how much investors are willing to pay for future earnings – of 15.1. That’s up from 12.6 at the start of this year.

Mergers fell off dramatically after 2007 as companies retrenched and focused on survival in the wake of the financial crisis and last recession.

An economic recovery that began more than four years ago has been halting, but the broader stock market has surged.

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