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Deal Talk Energizes Stocks

Alcoa climbs on rumors of a buyout offer. GM and 3M boost the Dow.

Updated from 4:14 p.m. EST

Stocks were smartly higher Tuesday as talk of a takeover for a U.S. industrial stalwart and fairly solid earnings reports brought in buyers.


Dow Jones Industrial Average

was up 102.30 points, or 0.81%, to 12,654.85, with 28 of the Dow's 30 components finishing with gains. The

Nasdaq Composite

gained 9.50 points, or 0.39%, to 2459.88, and the

S&P 500

added 10.89 points, or 0.76%, to 1444.26.

"Investors welcomed today's corporate news while ignoring economic data and oil prices," said Peter Cardillo, chief market economist with Avalon Partners. "Today's move indicates that favorable news will continue to bring money in from the sidelines. Any positive news extends the bullish sentiment."

Leading the way higher was a report from overseas that two Australian companies,

Rio Tinto



BHP Billiton

(BHP) - Get BHP Group Ltd Sponsored ADR Report

, could be working on separate $40 billion offers to acquire Dow component


(AA) - Get Alcoa Corp. Report


Shares of the Pennsylvania-based aluminum giant added 6.4% to close at $35.

The Dow also got a boost from gains in components

General Motors

(GM) - Get General Motors Company (GM) Report



(MMM) - Get 3M Company Report


GM finished with a gain of 2.5% to $36.59 after Merrill Lynch upgraded the automaker to buy from sell, assigning a stock price target of $50. The firm also downgraded


(F) - Get Ford Motor Company Report

to sell from neutral, based on valuation. Ford shed 2.3% at $8.45.

Meanwhile, 3M shares were climbing after the conglomerate announced a $7 billion buyback plan. Shares rose $1.84, or 2.5%, to $76.43.

"Today looks better than it really may be, due to a few Dow components accounting for a lot of the return," said Barry Hyman, equity market strategist with EKN Financial. "A lot depends going forward as to how we perceive the interest rate policy. The perception of interest rate cuts has diminished greatly."

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Roughly 2.68 billion shares changed hands on the

New York Stock Exchange

. Advancers beat decliners by an 8-to-3 margin. Volume on the Nasdaq reached nearly 1.88 billion shares, with winners outpacing losers 3 to 2.

Among earnings,

Coca-Cola Enterprises


posted a fourth-quarter loss of $1.71 billion, or $3.59 a share, swelling from a loss of $57 million, or 12 cents a share, a year earlier. Excluding items, the company earned 20 cents a share, topping estimates.

The Coke bottler also said it plans to cut 3,500 jobs, roughly 5% of its workforce. Shares finished up 42 cents, or 2.1%, to $20.95.


KB Home

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swung to a fourth-quarter loss of $49.6 million, or 64 cents a share, from a year-earlier profit of $304.4 million, or $3.44 a share, due to higher cancellation rates and big charges related to land impairments. The Thomson First Call estimate was for a loss of $1.14 a share. KB Home added $1.49, or 2.9%, to $53.43.

Elsewhere, shares of



surged after the restaurant operator said it will explore strategic options, including a possible sale or recapitalization of the company. Applebee's jumped $2.09, or 8.6%, to $26.32.

Away from equities, the Commerce Department said the U.S. trade deficit widened to $61.2 billion in December from $58.1 billion in November. Economists expected the trade deficit would widen to $59.5 billion.

Treasury prices were lower. The 10-year note was off 3/32, yielding 4.82%, and the 30-year bond was down 7/32 to yield 4.90%.

Crude futures reversed a steep decline from the previous session as the northeastern U.S. dealt with a flurry of winter weather. The near-month contract finished up $1.25 at $59.06 a barrel. Natural gas tacked on 13 cents to $7.36.

Prices for precious metals firmed. Gold finished the session with a gain of $1.20 to $668.50 an ounce, and silver added 20 cents to $13.91 an ounce.

Overseas, European shares rebounded. London's FTSE 100 was up 0.2% to 6366, and Frankfurt's Xetra DAX added 0.3% to 6878. Tokyo's Nikkei gained 0.7% to 17,621, but Hong Kong's Hang Seng slid 2.2% to 20,132.

Looking ahead,

Federal Reserve

Chairman Ben Bernanke will speak Wednesday about the U.S. economy before a Senate panel. His testimony will conclude with a speech Thursday before a House of Representatives committee.

Earnings reports are expected Wednesday from


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Office Depot





, among others.