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US stocks rise as Icahn discloses huge Apple stake

Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, in this June 27, 2007 file photo. US stocks closed in positive territory on Tuesday as corporate raider Carl Icahn revealed
Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference, held at the New York Stock Exchange, in this June 27, 2007 file photo. US stocks closed in positive territory on Tuesday as corporate raider Carl Icahn revealed a large stake in Apple, sending the technology titan 4.8 per cent higher. -- FILE PHOTO: REUTERS

NEW YORK (AFP) - US stocks closed in positive territory on Tuesday as corporate raider Carl Icahn revealed a large stake in Apple, sending the technology titan 4.8 per cent higher.

The broad-based S&P 500 climbed 4.69 (0.28 per cent) to 1,694.16, while the tech-rich Nasdaq Composite Index increased 14.49 (0.39 per cent) to 3,684.44.

The Dow Jones Industrial Average, whose 30 blue chip stocks do not include Apple, gained 31.33 (0.20 per cent) at 15,451.01.

Shares in Apple skyrocketed to finish at US$489.57 after activist Mr Icahn took to Twitter to disclose his "large" stake in the company, which he rated "extremely undervalued." Mr Icahn said he had pressed Apple chief executive Tim Cook to increase the company's share buyback, a move that often boosts a company's share price.

Mr Icahn, whose stake is worth more than US$1 billion (S$1.27 billion), according to media reports, said the two had a "nice conversation." Shares were also buoyed after Federal Reserve Bank of Atlanta President Dennis Lockhart stressed that the Fed's expected taper of its stimulus programme would be cautious.

AMR Corp., the parent of American Airlines, plummeted 45.4 per cent and US Airways lost 13.1 per cent after the Department of Justice sued to block a merger between the two companies, arguing the deal would reduce competition and push up fares.

The news also sent other airline shares tumbling, including Delta Airlines, which lost 7.1 per cent, and United Continental Holdings, down 7.5 per cent.

Embattled retailer JC Penney dropped 3.7 per cent after announcing that activist shareholder William Ackman has resigned and reaffirming that Myron Ullman would remain chief executive.

Steinway Musical Instruments lost 3.3 per cent to US$38.27 after Kohlberg & Co, which last month made a US$35 a share takeover bid for the company, indicated it would not try to top Monday's rival US$38 bid from another firm, reported to be hedge fund Paulson & Co.

Drug maker Eli Lilly jumped 2.6 per cent as the company said it had completed the phase three study of a new treatment for lung cancer and would be sending the results to regulators by next year.

Bond prices fell. The yield on the 10-year US Treasury rose to 2.71 per cent from 2.61 per cent late Monday, while the 30-year increased to 3.76 per cent from 3.67 per cent. Bond prices and yields move inversely.