Dow Shrugs Off Buffett's Big Buy

With two major deals stealing the day's headlines, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) finished essentially flat, down 10 points, or 0.07%, just a few points below 14,000.

Initial employment claims dropped to 341,000, from 368,000 the week before, and came in well under expectations of 365,000. Continuing unemployment claims also improved significantly, indicating further improvement in the job market.

Warren Buffett's Berkshire Hathaway (NYSE: BRK-B  ) surprised the market this morning, announcing it would buy Heinz (NYSE: HNZ  ) for $23 billion, sharing ownership with 3G Capital. The price tag of $72.50/share represents a 20% premium over Heinz's closing price on Wednesday, at $60.48. The company synonymous with ketchup would seem to be a perfect fit for Buffett, who prefers to invest in brand names with boring business models such as Fruit of the Loom and Coca-Cola. The world's richest investor has said he's fond of businesses that could be run by a "ham sandwich." Considering that, the purchase of the condiment giant would seem to be a perfect extension of that philosophy. Berkshire shares finished up 1.3%, while Heinz gained 19.9%.

The other deal today was the merger between US Airways (NYSE: LCC  ) and American Airlines, valued at $11 billion, and was widely anticipated. The two companies will combine to form the world's largest airline, and shares of American-parent AMR jumped 63% on the news, as shareholders may get a piece of the new company despite American's bankruptcy. US Airways shares dropped 4.6%.

Despite the Dow's flat performance, the market is generally enthused by M&A activity, which seems to be picking up, as today's events constitute three major deals in just a matter of weeks, including the Dell buyout earlier this year.

After hours, Herbalife (NYSE: HLF  ) was making noise again, gaining 24%, after activist investor Carl Icahn disclosed a 13% stake in the nutritional supplement maker. Herbalife shares have gotten rocked back and forth since hedge fund manager Bill Ackman revealed a large short position in December, and called the multi-level marketing company a "pyramid scheme." Shares have nearly doubled since bottoming after Ackman presented his case for shorting the stock.

Are you at ease ... or nervous? It's been a great five-year run for investors, with the Dow and S&P at or near all-time highs. Yet, fears abound. When will the next downturn hit? Will political gridlock lead to portfolio-killing inflation? To learn how to protect your portfolio, click here for free guidance from the Motley Fool Pro Academy!

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