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Wall Street Cheers Deals

Robert Holmes

Stocks jumped Monday as a stream of buyouts and solid earnings greeted the bulls to begin a new trading week.

The Dow Jones Industrial Average surged 108.33 points, or 0.86%, to 12,720.46, with 26 of the 30 components ending the day with gains. The S&P 500 advanced 15.62 points, or 1.08%, to 1468.47, reaching a 6 1/2-year high. The Nasdaq climbed 26.39 points, or 1.06%, to 2518.33.

The rise allowed the market to build on last week's gains, when the Dow was up 0.4%, the S&P added 0.6% and the Nasdaq increased 0.8%.

The major indices have now rebounded from losses suffered on Feb. 27, when a benchmark index in mainland China sank more than 9% and pressured U.S. markets. The Dow had its worst single-day pullback since the market reopened after the terrorist attacks of Sept. 11, 2001, dropping by as much as 546 points at one point.

"For now investors are enjoying the ride," Barry Hyman, equity market strategist with EKN Financial. "There's a lot of liquidity in the system. It says a lot towards the strength of the global economy. Now we have to look for the next catalyst. If this rally is going to continue, we need to see a pickup in some lagging sectors, such as consumer cyclicals."

About 2.69 billion shares changed hands on the New York Stock Exchange, with advancers beating decliners by an 8-to-3 margin. Volume on the Nasdaq reached 1.78 billion shares, with winners outpacing decliners 7 to 3.

Paul Nolte, director of investments with Hinsdale Associates, noted that volume has been lighter than usual, so the market may not be gaining as much traction as it seems.

"What is happening is the market rises, but on little volume, but declines occur on heavier volume -- to us an indication that investors are more willing sellers than buyers," he said.

Though corporate earnings are starting to flood in, a round of dealmaking dominated the early headlines. The biggest takeover will see student lender Sallie Mae (SLM) acquired by an investor group led by J.C. Flowers in a $25 billion transaction.

Shares of Sallie Mae soared 18.4% to close at $55.35 after the $60-a-share offer was disclosed.

Elsewhere, Google (GOOG) set plans late Friday to pay $3.1 billion for Internet ad outfit DoubleClick in a bid to tap into the market for graphics-based advertising. Google rose $7.98, or 1.7%, to $474.27.

Meanwhile, the day's earnings were generally positive for the top names on the schedule.

Citigroup (C) said it earned $5 billion, or $1.01 a share, in the latest quarter, down from $5.56 billion and $1.11 a share a year earlier, but adjusted earnings of $1.18 were 9 cents better than estimates. Citigroup added $1.33, or 2.6%, to $52.93.

Drugmaker Eli Lilly (LLY) topped analysts' first-quarter expectations and said it should earn $3.30 to $3.40 a share for the full year, up from its earlier target of $3.25 to $3.35. The stock ended up $1.52, or 2.7%, to $58.40.

Wachovia (WB) posted a first-quarter profit of $2.3 billion, or $1.20 a share, an increase of 33% from the year-ago period. The Thomson First Call consensus was for earnings per share of $1.16. Shares of Wachovia climbed $1.08, or 2%, to $55.06.

Other reporters included toymaker Mattel (MAT), which posted a first-quarter profit that beat expectations. Excluding items, Eaton (ETN) reported a first-quarter profit of $1.62 a share, topping estimates. Mattel dipped 0.9% to $28.10, while Eaton closed higher by 2.8% to $87.50.

Among ratings changes, Friedman Billings and Prudential downgraded shares of MedImmune (MEDI) to market perform and neutral, respectively. Meanwhile, Goldman Sachs upgraded Dow component Merck (MRK) to neutral from sell.

MedImmune gained $1.25, or 2.8%, to $45.44, after billionaire investor Carl Icahn said he would not oppose a sale of the company. Merck tacked on 11 cents, or 0.2%, to $50.32.

Away from stocks, commodities finished mixed following a volatile session. Crude oil futures slipped by 2 cents at $63.61 a barrel. Gold finished up $4.60 to $694.50 an ounce.

"Once the initial dust settles, investors will have to keep an eye on oil and interest rates," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "Those are two bearish pulls on the market. While they are not on the front burner at the moment, they are simmering in the background. If one or the other begins to boil over, it will be a negative distraction for investors."

On the economic front, the Commerce Department said retail sales rose 0.7% last month, slightly above economists' expectations. Excluding autos, retail sales were up 0.8% in March, also ahead of forecasts.

In a separate report, the Commerce Department said business inventories rose 0.3% in February, in line with estimates.

Also, the New York Federal Reserve Bank said its Empire State Manufacturing Index rose to a reading of 3.8 in April from 1.9 in March. The index was expected to jump, however, to 10.0.

Treasuries were higher for the day, as the 10-year note rose 8/32 in price, yielding 4.73%, and the 30-year bond added 20/32 to yield 4.89%. The dollar weakened against the world's major currencies.

Overseas, markets were in positive territory. Tokyo's Nikkei surged 1.5% to 17,628, and Hong Kong's Hang Seng soared 2.1% to 20,758. London's FTSE was up 0.8% at 6516, and Frankfurt's DAX gained 1.8% at 7338.

On Tuesday, earnings reporting will pick up, as results are expected from Intel (INTC), Yahoo! (YHOO), IBM (IBM) and Johnson & Johnson (JNJ), among others.