Mergers Offset Pfizer Woes

Updated from 4:10 p.m. EST

Corporate dealmaking powered an advance in stocks Monday and overcame news that Pfizer (PFE Quote) would stop work on its most promising drug.

The Dow Jones Industrial Average rose 89.72 points, or 0.74%, to 12,283.85, supported by gains of 2.3% in IBM (IBM Quote) and American Express (AXP Quote).

Notably absent from the rally was Pfizer. Shares the world's biggest drugmaker slumped $2.96, or 10.6%, to close at $24.90 after the company said this weekend that it will end development on torcetrapib, a cholesterol fighter that had been seen as the successor to Lipitor.

For Pfizer, the news is particularly discouraging because the drug was expected to eventually produce billions of dollars in annual sales. Now, the company will have to try to find a way to fill the gap.

The S&P 500 added 12.41 points, or 0.89%, to 1409.12. Meanwhile, the tech-laden Nasdaq Composite jumped 35.18 points, or 1.46%, to 2448.39, aided by increases of 4.8% or more in Sun Microsystems (SUNW Quote) and Wynn Resorts (WYNN Quote).

The rally came a week after stocks had their worst session in more than four months.

"The equity markets may be showing signs of age, however [they] have yet to roll over and die," said Paul Nolte, director of investments with Hinsdale Associates. "The mood coming into one of the best months of the year is poor. The technical indicators have come off a bit from their overbought condition."