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Stocks Gain Over 1%, Led by Health Care

Stocks rose to fresh 15-month highs Tuesday, led by health-care stocks as a key Senate-seat vote in Massachusetts today could change the course of health-care reform. Citigroup bounced back after an initial dip on disappointing results.

The Dow Jones Industrial Averagejumped 115.78, or 1.1 percent, to close at 10,725.43. The S&P 500gained 1.3 percent and the Nasdaq advanced 1.4 percent.

Merck and Pfizer led the Dow as Wall Street was closely watching a vote in Massachusettsfor the late Ted Kennedy's seat; Democrats worry their plan for health-care reform may fail if they lose the seat. Health insurers also rallied, with strong gains in Humana and Aetna.

"The action in Massachusetts is a revolt on tax and spend," Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston, told Reuters. "It's a potential for gridlock much like we had in the Clinton years. I think there's certainly a desire to return to a more balanced political landscape."

Over on the Nasdaq, chips including Sandisk, Marvel and Xilinx were among the top gainers after RBC Capital raised its rating on Xilinx to "outperform" from "sector perform."

The Philadelphia Stock Exchange semiconductor index shot up 1.8 percent.

Techs overall got a boost from anticipation of strong earnings from IBM, which delivered, beating expectationsin a report after the bell.

Apple rallied 4.4 percent after the company said it will host a special event on Jan. 27, which is expected to be a new tablet-style computer. The Apple Insider says the tablet could launch in June for $999. Plus, Apple is said to be in talks with HarperCollins about making e-books specifically for the Apple tablet, which would be a shot across the bow at Amazon.

Shares of CSX gained 1 percent ahead of its earnings. After the bell, the railroad reported its earningsrose 23 percent, better than expected.

Citigroup hit its earnings target but missed on revenue. The stock initially opened lower but then rebounded by midday, ending up 3.5 percent.

Shares of TD Ameritrade also gained more than 3 percent, even as the online brokerage reported earnings fell 26 percent due to thin trading volume.

McDonald's advanced nearly 2 percent after Credit Suisse raised its rating on the stock to "outperform" from "neutral," citing several driving factors, mostly the potential from its overseas business. The brokerage cut its rating on rival Burger King .

At last, a deal at the candy counter: Cadbury's U.S.-traded shares rose over 3.5 percent after the British chocolatier accepted an improved cash-and-stock offer fromKraft Foods worth about $19 billion. Kraft raised the cash part of its original bid and lowered the stock portion, something that may ease concerns expressed about the first bid from Warren Buffett, whose Berkshire Hathaway is a major Kraft shareholder.

There was other deal news.

Tyco International will acquire Broadview Security, part of Brink's Home Security, in a $1.9 billion deal that unites two of the largest home and business security companies in North America.

Homebuilders finished mixed after a report showed homebuilder sentiment fell in January to its lowest level since June.

And Japan Airlines has filed for bankruptcy protection. The carrier is slashing nearly 16,000 jobs and will remain in business thanks to backing from the government. It currently owes more than $25 billion.

Volume was light: Roughly 1.04 billion shares changed hands on the New York Stock Exchange, less than half last year's daily average. Advancers outpaced decliners, 7 to 2.

Still to Come:

WEDNESDAY: Berkshire shareholder meeting; Obama's one-year anniversary; Congress starts debate on raising debt cap; weekly mortgage applications; PPI; housing starts; earnings from Bank of America, Morgan Stanley, Wells Fargo, Coach, eBay, Starbucks and Xilinx
THURSDAY: Weekly jobless claims; Philly Fed index; leading indicators; weekly crude and gas inventories; earnings from Goldman Sachs, Continental, Southwest, UnitedHealth, Xerox, American Express, Google, AMD and Capital One
FRIDAY: House hearing on financial-industry compensation; earnings from GE, McDonald's, Schlumberger, Kimberly-Clark and SunTrust

Send comments to cindy.perman@nbcuni.com.