Stocks Merry Ahead of Holiday

Updated from 12:39 p.m. EST

Stocks in the U.S. extended their gains Monday, as a cash infusion for Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) bolstered sentiment for the few traders participating in the holiday-shortened session.

The Dow Jones Industrial Average rose 98.68 points, or 0.73%, to 13,549.33, closing near its highs of the session. The S&P 500 rose 11.99 points, or 0.81%, to 1496.45. The Nasdaq Composite added 21.51 points, or 0.8%, to 2713.50.

With the market closing three hours early ahead of the Christmas holiday, volume was light. About 1.24 billion shares changed hands on the New York Stock Exchange, with advancers beating decliners by a 3-to-1 margin. On the Nasdaq, only 733,000 shares were traded, as winners beat losers 3 to 2.

While there was little corporate news, Merrill was in the spotlight after announcing two separate deals that will help boost its capital position. Shortly after the opening bell, the brokerage giant said it has received a combined $6.2 billion cash boost from Singapore's Temasek Holdings and Davis Selected Advisors.

Earlier, General Electric's (GE Quote - Cramer on GE - Stock Picks) finance arm, GE Capital, said it will purchase most of Merrill's middle-market commercial finance business. The deal is expected to add more than $10 billion in assets to GE Capital during the first quarter of 2008.

Shares of Merrill fell $1.64, or 3%, to $53.90, after media reports indicated that the stock sale will come at a discount to its current price.

Still, financial indices gained ground as the Temasek investment showed that foreign investors continue to have an appetite for the beleaguered sector. The NYSE Financial Sector Index gained 1.6%, the Amex Financial Sub Index rose 1.4%, and the Amex Securities Broker/Dealer Index tacked on 0.4%.