Stocks Start Week With Rally

Updated from 4:10 p.m. EDT

Stocks in the U.S. booked substantial gains Monday as traders welcomed a downturn in oil prices and several pieces of good news out of the tech sector, including a potential merger involving Hewlett-Packard (HPQ Quote).

The Dow Jones Industrial Average advanced 130.43 points, or 1.02%, to 12,876.31, and the S&P 500 swelled by 15.3 points, or 1.1%, at 1403.58. The Nasdaq Composite was the best-performing index, spiking 42.97 points, or 1.76%, to 2488.49.

One boon for tech shares came late in the day amid word that Hewlett-Packard is in advanced talks to buy Electronic Data Systems (EDS Quote). The Wall Street Journal said the deal could be worth $12 billion to $13 billion.

H-P was off 4.7%, but EDS surged 27.9%, and the prospect for a pact may have shored up hopes that merger activity is gaining traction once again after stalling amid the credit crunch.

"Deals really dry up when the market is having a rough patch," said Richard Sparks, senior equities analyst with Schaeffer's Investment Research. "Nobody wants to buy if they think the stocks are going to be lower later on. Then again, EDS had a pretty sharp downturn over the past few months, so that made it more attractive."

Robert Pavlik, chief investment officer with Oaktree Asset Management, said that this shows companies are still seeing value out there. "For stronger companies like the H-Ps, I think the credit crunch plays less of a role in their operations," he said. "These are highly capitalized and high-credit-rated companies who don't find troubles going to the market and issuing paper if need be."

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