Stocks Build on Last Week's Gains

Earnings and merger news drive the averages higher.
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Updated from 4:05 p.m. EDT

Stocks posted another day of solid gains Monday, as more bullish earnings news and another round of mergers helped the averages build on the gains of late last week.

The

Dow Jones Industrial Average

rose 84.76 points, or 0.83%, to 10,242.47; the

S&P 500

gained 9.98 points, or 0.87%, to 1162.10; and the

Nasdaq Composite

added 18.59 points, or 0.96%, to 1950.78. All three major indices finished above their best closing highs of last week.

Trading volume was light, with 1.77 billion shares changing hands on the

New York Stock Exchange

; advancers beat decliners by a 3-to-1 margin. Volume on the Nasdaq was 1.44 billion shares, with advancers beating decliners 3 to 2.

In other markets, the 10-year Treasury note was down 1/32 in price to yield 4.25%, while the dollar was higher against the euro and lower against the yen.

"Today's been quite encouraging, with a nice rally this morning that we've managed to hold on to," said Ken Tower, chief market strategist with CyberTrader. "The important first step for bulls is to get the indices above their 10-day moving averages. Tomorrow will be a very important test with consumer confidence for April, which people think will suggest a slowdown in the economy and a loss of consumer-driven momentum."

Big earnings and mixed economic data drove a frenetic five sessions on Wall Street last week, with the Dow finishing at 10,157, up 70 points. Though stocks fell Friday, the last half-hour of that session saw bargain-hunters swoop in and shave about 70 points off the Dow's loss.

"You're seeing a continuation from Friday's end-of-day rise," said Larry Wachtel, senior market analyst with Wachovia Securities. "The earnings have been helpful and showed things are improving, but the question is still whether the

Fed

will go higher or not. There are inflationary pressures, no doubt. The market is still extremely oversold, which is where you're getting the bounce from."

Stronger sectors Monday included energy, retail, technology, materials and utilities. Weaker ones included automobiles and drugs.

Oil finished lower on Nymex, falling 82 cents to $54.57 a barrel. The sector was abuzz with word of a refinery mega-merger in which

Valero Energy

(VLO) - Get Report

will buy

Premcor

(PCO)

for $6.9 billion in cash and stock. Premcor jumped $10.70, or 18.1%, to $69.70, while Valero finished up 83 cents, or 1.1%, to $75.87.

"In a lot of mergers now, the business can't grow any more so it buys another," said Paul Nolte, director of investments with Hinsdale Associates. "Valero can't grow any bigger, so it purchases Premcor. The rise in energy stocks today is definitely merger-related."

On the economic front, the National Association of Realtors said Monday that existing-home sales for March rose 1% to 6.89 million, higher than the expected 6.80 million target from economists. Existing-home inventories fell 0.2% to 2.33 million, while existing-home prices for March rose 11.4% to $195,000.

Homebuilding companies gained on the news, with

Hovnanian

(HOV) - Get Report

finishing up $1.83, or 3.8%, to $50.02 and

Lennar

(LEN) - Get Report

$1.67, or 3.2% higher, at $54.22.

Toll Brothers

(TOL) - Get Report

gained $2.86, or 3.9%, to $75.36, while

Ryland Group

(RYL)

was up $2.08, or 3.5%, to $61.19.

In company news,

MCI

(MCIP)

said over the weekend that a $30-a-share takeover offer made last week by

Qwest

(Q)

is superior to the offer it had previously embraced from

Verizon

(VZ) - Get Report

.

Verizon, which recently bought out MCI's biggest single shareholder at $25 a share, could raise its bid, take its offer directly to shareholders or walk away with a breakup fee and the upside on its current MCI holdings.

Also,

DoubleClick

(DCLK)

agreed to be taken private for $8.50 a share in cash by private equity firm Hellman & Friedman. The deal, which values DoubleClick at $1.1 billion, comes just days after shares enjoyed a 17% run-up on rumors that a private equity buyout was near. DoubleClick was lower Monday, however, by 45 cents, or 5.2%, to $8.12.

On Monday,

SBC Communications

(SBC)

reported first-quarter earnings of $885 million, or 27 cents a share, compared with $1.9 billion, or 59 cents a share, a year ago. Excluding merger-related expenses totaling $242 million, the company earned $1.1 billion, or 34 cents a share. Analysts polled by Thomson First Call expected earnings of 33 cents a share before items. SBC, which agreed earlier this year to purchase

AT&T

(T) - Get Report

, added 12 cents, or 0.5%, to $23.32.

Google

(GOOG) - Get Report

also helped to boost tech stocks Monday, challenging its 52-week high of $224. Shares rose $7.72, or 3.6%, to $223.53.

Kimberly-Clark

(KMB) - Get Report

said first-quarter profit from continuing operations was $450.1 million, or 93 cents a share, up from $443.8 million, or 88 cents a share, a year ago. The year-ago figures exclude the spinoff of

Neenah Paper

(NP) - Get Report

. Including discontinued operations, Kimberly-Clark earned $459.3 million, or 91 cents per share, a year ago. Analysts expected the company to earn 93 cents a share, according to Thomson First Call.

Shares were lower, however, as the company said second-quarter earnings are projected at 92 to 94 cents a share, below analysts' estimate for earnings per share of 95 cents. Kimberly-Clark fell 29 cents, or 0.5%, to $63.24.

New Orleans-based power company

Entergy

(ETR) - Get Report

said first-quarter earnings slid 17% from a year ago to $172 million, or 79 cents a share, matching estimates. Revenue rose 3% from a year ago to $2.32 billion, about $20 million below estimates. Shares lost 54 cents, or 0.7%, to $71.81.

Also Monday,

Reebok

(RBK)

said first-quarter profit rose 5.1% to $43.2 million, or 70 cents a share. The Thomson First Call average estimate called for EPS of 69 cents. Sales rose 11% to $925 million from $831.9 million last year. Reebok added 61 cents, or 1.4%, to $42.64.

Sepracor's

(SEPR)

first-quarter loss narrowed 55% from a year ago to $22.6 million, or 22 cents a share, on a 20% rise in revenue to $119 million. The revenue line was about $10 million better than expected. Sepracor rose 97 cents, or 1.6%, to $61.25.

In brokerage action, CSFB upgraded

Apple Computer

(AAPL) - Get Report

to outperform from neutral, citing a belief that its Mac line of computers will see increased growth. The brokerage also raised its stock-price target to $45 from $40, its 2005 earnings estimate to $1.36 a share from $1.32, and its 2006 earnings estimate to $1.61 a share from $1.52. Apple gained $1.48, or 4.2%, to $36.98.

Smith Barney upgraded

Micron Technology

(MU) - Get Report

to hold from sell, saying it expects near-term bottoming in dynamic random access memory (DRAM) fundamentals as well as stock valuation. The brokerage still maintains its $11.50 stock-price target. Micron was up 17 cents, or 1.8%, to close at $9.58.

Piper Jaffray upgraded

Overstock.com

(OSTK) - Get Report

to outperform from market perform. The brokerage said continued growth in revenue and profits, along with better leverage from sales and marketing expenses, will help boost shares. Overstock reported quarterly results on Friday, with a first-quarter loss roughly doubled from a year ago, as the company's technology and marketing costs offset increasing margins. Shares added $2.18, or 6.4%, to $36.33.

Prudential raised its rating on

Starbucks

(SBUX) - Get Report

to overweight from neutral, citing valuation. Shares rose $1.89, or 4.1%, to $47.45.

Shares of

Ciena

(CIEN) - Get Report

were higher after the company was upgraded to outperform from market perform at Piper Jaffray. The brokerage believes that margins will improve over the next few quarters. Piper Jaffray initiated a $2.50 stock-price target, raised its 2005 revenue estimate to $405 million from $355 million, but widened its loss estimate to 18 cents a share from 17 cents. Ciena gained 10 cents, or 5.2%, to $2.01.

Overseas markets closed higher with London's FTSE 100 up 0.3% at 4864 and Germany's Xetra DAX adding 0.6% to 4246. In Asia, Japan's Nikkei rose 0.3% overnight to 11,074, while Hong Kong's Hang Seng rose 0.4% to 13,750.