US SMALL/MIDCAPS-Energy drags stocks; M&A lifts health care

By Rodrigo Campos

NEW YORK, May 24 (BestGrowthStock) – Late selling drove mid- and
smallcap stocks sharply lower on Monday, with energy shares
leading declines, while a $1 billion deal in health care gave
the sector a boost and limited overall losses.

Natural gas slipped as concerns about the economic recovery
and rising supplies offset forecasts for a warm summer, which
should boost energy consumption by air conditioners.

The energy sectors of both the small and midcap S&P indexes
fell more than 3 percent.

“People are beginning to realize maybe (economies) won’t
grow so fast and they are starting to hedge their bets,” said
Edward Hemmelgarn, president and chief investment officer at
Shaker Investments in Cleveland.

Dynegy (DYN.N: ) shares closed at a session low, down 9.8
percent at $1.01 after news the electric energy producer shut
two units at its Moss Landing natural gas-fired power plant in
California last week.

But health stocks mostly rose as Gentiva Health Services
Inc (GTIV.O: ) agreed to buy Odyssey HealthCare Inc (ODSY.O: ) in a
$1 billion cash deal, which could spark more consolidation in
the home and hospice care market.

Gentiva shares rose 13.1 percent to $29.17 while Odyssey
jumped 38.7 percent to $26.75.

The health care sector was the best performing in both the
small and midcap S&P indexes, with the health smallcaps
(.6GSPA: ) up 0.4 percent.

“This is a continuation of a lot of M&A activity out
there,” Hemmelgarn said. “Companies are sitting on a lot of
cash. There’s an acquisition premium in bidding into small and
midcaps.”

The S&P MidCap 400 index (.MID: ) fell 1.04 percent while the
S&P SmallCap 600 index (.SML: ) lost 1.32 percent. In comparison,
the benchmark S&P 500 (.SPX: ) fell 1.29 percent.

Among top decliners, shares of DreamWorks Animation SKG Inc
(DWA.O: ) tumbled 11 percent to $31.05 after a tepid opening
weekend for “Shrek Forever After.” [ID:nN24262573].

Investment Advice

(Editing by Leslie Adler)

US SMALL/MIDCAPS-Energy drags stocks; M&A lifts health care