M&A's Rise Muted by Gold Rally

NEW YORK (TheStreet) -- The return of mergers and acquisitions is a bullish sign for the stock market, but surging gold prices and a falling dollar may weigh on its positive effects, market analysts argue.

A handful of deals have been struck in the last few weeks, including Disney's (DIS Quote) acquisition of Marvel Entertainment (MVL Quote), Baker Hughes' (BHI Quote) $5.5 billion takeover of BJ Services (BJS Quote) and Japanese drugmaker Dainippon Sumitomo Pharma's purchase of Sepracor (SEPR Quote).

Tuesday's top headlines indicated that more M&A deals could be in the pipeline, as Cadbury (CBY Quote) rejected a $16.7 billion bid by Kraft Foods (KFT Quote), setting the table for some type of deal involving the two -- or, potentially, Hershey (HSY Quote).

In addition, Deutsche Telecom (DT Quote) announced it would link its T-Mobile U.K. unit with France Telecom's (FTE Quote) Orange U.K. division in a joint venture set to become the largest mobile provider in the country.

Normally, M&A announcements are treated as a bullish indicator by the market, and that held true Tuesday. The major U.S. averages were on the rise after European bourses and Asian markets advanced overnight, as traders took the recent deals as a commentary on how these companies view the stock market down the road.

"M&A activity can be viewed as a positive, as it shows companies have some confidence and feel it's the right time to go out and buy," said Richard Sparks, senior equity analyst with Schaeffer's Investment Research. "The argument can be made that the better time to buy was back in March, but we had a lot of fear in the market and companies were very unsure about how the future was going to look. This shows there is a little more positivity looking forward, at least with respect to the economy and individual earnings prospects."

AUDIO: Listen to Paul Nolte, director of investments with Hinsdale Associates, discuss the effects of M&A activity on the market: