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Market Update

U.S. Stocks Waver, Trade Deficit Rises 8.5%

Author: Nichole Harper
Last Update: 11:56 AM ET June 04 2013

11:50 AM New York – U.S. stocks traded sideways and merger announcement of $4.5 billion hovered market sentiment as traders weighed stimulus withdrawal impact. IBM agreed to acquire SoftLayer for $2 billion and Salesforce.com agreed to buy ExactTarget for $2.5 billion. U.S. trade deficit increased 8.5% in April on record imports.

Market indexes on Wall Street traded sideways and trade deficit in April jumped on record imports.

The S&P 500 index declined 0.61 to 1,639.54 and the Nasdaq Composite Index increased 4.4 to 3,469.76.

IBM to Acquire SoftLayer for $2 Billion

IBM Corp agreed to acquire privately held SoftLayer Technologies, Inc that valued the company at $2 billion as the company strengthens its presence in cloud computing for enterprises and small businesses.

SoftLayer in an emailed statement to Ticker.com announced the deal and highlighted the company’s progress since its inception in 2005.

The privately held data center manager is based in Dallas, Texas and operates 13 data centers in the U.S., The Netherlands and Singapore.

SoftLayer as recently as 2010 had 6,000 clients and has been growing through acquisition and the number of clients has jumped to 21,000 and generated revenues of at least $320 million according to the sources in the company. The company has struggled with profits with significant capital expenditures.

The $2 billion price paid by IBM is a rich multiple for a hosting company that has anemic profitability record.

IBM projected its cloud services to generate revenues of $7 billion by 2015 and with the acquisition the technology company plans to serve smaller businesses by offering public cloud services and competing with Amazon.

In recent years, IBM has gained traction among larger businesses by offering private and on-premise cloud computing services.

U.S. Trade Deficit Rises 8.5%

The U.S. trade deficit increased 8.5% to $40.3 billion in April from the revised March deficit of $37.1 billion, Commerce Department said today.

Adjusted for inflation, deficit increased to $47.6 billion from $44.6 billion in March. The trade gap declined to $40.42 billion in three months to April from the $41.22 billion in the previous three months.

Commerce Department also revised annual trade data as far back as 1999 and the 2012 gap was smaller than previously expected.

Imports in April increased 2.4% to $227.7 billion and exports rose 1.2% to $187.4 billion. Imports from China increased 21.2% to $24.1 billion from $17.9 billion in March.

U.S. exports to European Union of 27 nations increased 7.9% in April and in the first four months declined 7.4% from a year ago period.

Stocks in Review

General Motors (GM) increased 2% after the company was selected to replace H.J. Heinz in the widely followed S&P 500 and 100 indexes. Heinz has agreed to go private.

International Business Machines Corp. (IBM) declined 0.6% to $207.64 and the tech giant agreed to acquire a privately held web hosting company SoftLayer for $2 billion.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc