Stocks Close Higher, Fueled by Deals, Spending

NEW YORK (TheStreet) -- Stocks closed higher Monday as a surge in M&A activity, a rise in consumer spending and reports that a bailout plan for Greece is in the works eased concerns about the recovery's sustainability.

The Dow Jones Industrial Average closed up 79 points, or 0.8%, to 10,404. The S&P 500 gained 11 points, or 1%, to 1116 and the Nasdaq went higher by 35 points, or 1.6%, to 2274.

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"Our concern -- and a broad swatch of the market's concern -- is not whether we're in a recovery, but whether we'll be able to sustain the recovery," said Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors.

Baird said the market is looking for signs that the recovery will hold up even after there's a handoff to consumers when government spending fades.

"Signs that there will be some favorable resolution to Greece debt issues, all the M&A news -- which is generally deemed to be a bullish factor for equities -- and signs that consumers are feeling better enough about their situations to ramp up spending, all of these factors came together today to make markets more positive about the recovery's sustainability," Baird said.

Personal spending outpaced expectations in January, rising 0.5% compared with the 0.4% increase that economists had been expecting. Personal income, however, grew a meager 0.1% in January, after rising 0.3% in December. Economists had been projecting a 0.4% increase.

"We need to see improvement in both the willingness and ability of consumers to spend. Unfortunately, constraints on credit availability and expectations for muted job creation present substantial headwinds to a resurgent consumer," Baird cautioned.

After the closing bell, women's clothing retailer Dress Barn(DBRN), like Dillard's(DDS) in the morning, said it swung to a profit and beat earnings forecasts. Dillard's gained 18.7% after its morning report, while Dress Barn went 3.5% higher before its late-afternoon earnings reveal.

Retail firms finished broadly higher, as the S&P Retail Index gained 1.6% on the day

Investors largely shrugged off news from the Institute for Supply Management showing that its manufacturing index for February came in at 56.5, which was weaker than the reading of 58 that Wall Street had been expecting.