Mergers Give Stocks a Boost - TheStreet

Mergers Give Stocks a Boost

Dealmaking helps the U.S. market stabilize after Tuesday's selloff.
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Updated from 4:05 p.m. EDT

Stocks in New York rose Wednesday as new merger activity and lower oil prices helped traders take the first steps toward recovering from the prior session's steep decline.

The

Dow Jones Industrial Average

rose 76.17 points, or 0.56%, at 13,577.87, and the

S&P 500

added 8.64 points, or 0.57%, to 1518.76. The

Nasdaq

was better by 12.63 points, or 0.48%, to 2651.79.

That helped the market recover some of Tuesday's losses, when the Dow sank 148.27 points to 13,501.70, and the S&P gave back 21.73 points to 1510.12. The Nasdaq was worse by 30.86 points to 2639.16.

"We shook out yesterday and have recovered a bit today, so the basic trend looks intact," said Larry Wachtel, senior market analyst with Wachovia Securities. "The problems are still there, as questions on the subprime market and higher energy costs still linger. However, we are coming into earnings season, and we're expecting an underpromise-overdeliver period."

Breadth and volume improved from Tuesday's levels. About 3.06 billion shares changed hands on the

New York Stock Exchange

, as advancers matched decliners. Volume on the Nasdaq reached 1.99 billion shares, with winners topping losers 8 to 7.

One thing domestic stocks had going in their favor was more news on the buyout front, including a report that Canadian aluminum concern

Alcan

(AL) - Get Report

has started talks with

Rio Tinto

(RTP)

. Alcan is fighting a takeover bid from Pittsburgh's

Alcoa

(AA) - Get Report

.

Rio Tinto climbed 2.4% to $323.07, Alcoa ended up 1.5% to $42.28, and Alcan rose by 3.9% to $89.53.

Aside from that potential blockbuster, a number of small deals were also in the headlines.

Chaparral Steel

(CHAP) - Get Report

agreed to be acquired by

Gerdau Ameristeel

(GNA)

for $86 a share. Chaparral jumped 10.4% to close at $83.59, while Gerdau slid 7.3% to $14.55.

Elsewhere, Megasoft set plans to buy

Boston Communications

(BCGI)

for $3.60 a share, or $65 million in total, and

Digital Music Group

(DMGI)

struck a merger arrangement with Orchard Enterprises. Boston Communications soared 70.4% to $3.39, and Digital Music Group surged 12.5% to $4.49.

But other potential tie-ups have hit snags. Student lender

Sallie Mae

(SLM) - Get Report

said its private-equity acquirers have warned that pending legislation may lead them to pull out of a planned $25 billion buyout. Shares tumbled $5.65, or 9.8%, to $52.15.

Earlier,

Ventana Medical

(VMSI)

said its board has rejected

Roche's

unsolicited $75-a-share takeover bid. Ventana finished higher by $2.03, or 2.5%, to $82.28.

Earnings got under way this week, and among the day's early reporters,

Infosys

(INFY) - Get Report

beat estimates for the second quarter and lifted its guidance.

Wolverine

(WWW) - Get Report

was in line with expectations, and

AAR Corp.

(AIR) - Get Report

topped analyst targets by a penny.

As for the day's research calls, UBS upgraded

Yum! Brands

(YUM) - Get Report

to buy from neutral. JPMorgan downgraded video-game maker

Activision

(ATVI) - Get Report

to neutral from overweight.

Yum! Brands added $1.61, or 4.9%, to $34.41 ahead of its earnings report after the bell. Despite the downgrade, Activision gained 7 cents, or 0.4%, to $19.24.

Treasury prices fell hard, reversing the previous session's gain. The 10-year note was down 14/32 in price to yield 5.09%, while the 30-year bond was losing 30/32 and yielding 5.19%.

As for commodities, energy prices finished lower in the wake of the Energy Department's weekly inventory report, which showed an unexpected build of 1.2 million barrels in gasoline inventories last week. Distillate stocks rose 800,000 barrels, and crude inventories fell by 1.4 million barrels. Refinery utilization rose to 90.2%, but was below estimates.

The front-month August contract lost 25 cents to $72.56 a barrel, and gasoline ended down by 6 cents to $2.30 a gallon.

Metals prices were little changed. Gold eased by $2.30 at $662.10 an ounce, and silver was flat at $12.97 an ounce.

Overseas, markets were uniformly lower. Tokyo's Nikkei dropped 1.1%, and Hong Kong's Hang Seng sank 1.2%. London's FTSE fell 0.2%, and Frankfurt's DAX was losing 0.8%.