Stocks added to gains as investors recouped from last week's selloff to focus on an upbeat retail sales report, and news that corporations were beginning to spend cash on acquisitions.
TheDow Jones Industrial Average rose more than 70 points, after closing lower Friday and lower for the week on the back of debt concerns in periphery Euro zone countries and expectations of monetary tightening in China.
Caterpillar , JPMorgan , and Hewlett-Packard, led the blue-chips higher, while Disney and Intel fell.
The S&P 500 rose while the tech-heavy Nasdaq was flat. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 20.
Most key S&P sectors were higher, led by financials, telecom and industrials. Technology declined.
In M&A news, Caterpillar said it will buy Bucyrus in an $8.6 billion dealthat will help industrial equipment maker expand its reach in the mining equipment industry.
Sales of other industrial equipment makers also rose, including Terex , which has a small stake in Bucyrus. Joy Global, another mining equipment maker, skyrocketed as well. Kevin Kruszenski, head of equity trading at Keybanc Capital Markets in Cleveland, said Keybank viewed Joy Global as well as Bucyrus as potential takeover targets.
Also doing well is Oshkosh , which makes other specialty vehicles including fire and emergency vehicles, and Titan Wheel , a small-cap company that makes tires for mining equipment, Kruszenski noted.
Illinois Toolworks, meanwhile, also rose after reporting a 13 percent hike in sales for its latest fiscal quarter through Oct. 31. Sales exclusiding acquistions and currency fluctations rose 10 percent.
And EMC said it will pay $2.25 billion to acquiredata company Isilon in the biggest deal in the industry since Hewlett-Packard acquired 3Par earlier this year. EMC shares edged higher while Isilon rose 29 percent.
Most tech stocks were under presssure, however, on Monday. A report by Citigroup said the tech sector may be due for correction after rising about 21 percent since August, thanks largely to the semiconductor and semi equipment stocks.
According to Citi, while fundamentals at these companies are good, they don't support higher stock prices. "In essence, the investment community has rushed back into tech names over the last couple of months as the emphasis has been on economic and business direction rather than focusing in on stock price performance drivers, which is a common but often repeated investor error," Citi said.
Meanwhile, Apple shares were largley flat after reports of a note on the tech giant's website that says: "Tomorrow is just another day. That you'll never forget. Check back here tomorrow for an exciting announcement from iTunes." No details are forthcoming, and speculation about what it means is flying.
In company news,BHP Billiton
said it was dropping its $39 billion bid for fertilizer companyPotash
, and instead will restart its buyback program and return $4.2 billion to shareholders. BHP shares gained nearly 1 percent in pre-market trading, while Potash slipped 1.5 percent.
Massey Energy shares were higher on speculation in the Wall Street Journal that steel company Arcelor Mittal was also interesed in acquiring the coal mining company.
Johnson & Johnson shares rose after news that a blood thinner it is developing with Bayer AG is a step closer to approval by the U.S. Food and Drug Administration.
Goldman Sachs will not be able to repay $5 billion to investor Warren Buffett yet as the Federal Reserve hammers out guidelines for dividend increases, according to a report in the Wall Street Journal.
Retailers got a boost from the retail sales data. Saks , Nordstrom , JC Penney and Kohl's were all higher. Specialty retailers were mixed. Aeropostale , J Crew and Zumiez rose, whlie TJX Companies and Gap fell.
Several railroads got a nod from R.W. Baird. Baird raised Union Pacific to "outperform" from "neutral," and boosted its price target to $120 from $100, citing greater conviction in near-term rail volumes. The brokerage raised its price target for Norfolk Southern to $72 a share from $70, and for CSX to $80 a share from $70.
Over the weekend, former Federal Reserve Chairman Alan Greenspan said the U.S. must reduce its debt mountain or risk a bond market crisis.
European shares were mostly lower Monday with miners leading the declines. Ireland did not rule out the need to tap the European Union for emergency funds, but officials said again that no request had been made. Asian stocks were mixed with Japanese and Chinese markets gaining.
The euro was lower against the dollar because of the concerns. The dollar index rose to a six-week high as U.S. Treasury yields also gained.
Lowe's shares rose despite posting disappointing resultsMonday morning, and U.S. sales suffered a slowdown. Sales rose 1.9 percent to $11.59 billion, shy of the $11.75 billion anticipated by analysts surveyed by Thomson Reuters I/B/E/S. The home improvement retailer also cut its forecast.
Colgate-Palmolive's shares advanced after news the consumer products company was upgraded to "buy" from "hold," by Citigroup, saying the company was on the "road to recovery." The brokerage raised the company's price target to $85 a share from $77.
Monsanto's shares, meanwhile, slipped after Deutsche Bank downgraded the stock to "hold" from "buy."
Nordstrom and Urban Outfitters will release results after the close.
In other news, California is set to begin a bond auction and is looking to raise some $14 billion in debt.
On the economic front, business inventories rose 0.9 in September, from the same level a month earlier. The rise was in line with expectations, and was the highest level in two years.
October's retail sales rose 1.2 percentin October, their biggest gain in seven months, up from a 0.7 percent gain in September. Excluding autos, retail sales rose 0.4 percent, versus 0.5 percent in September.
The November Empire Manufacturing Index fell to -11.1 in November from 15.7 in October, far more than expected. Economists surveyed by Reuters expected the index to fall to 14.
On Tap Next Week:
MONDAY: Business inventories, credit card default rates reported, 13-F filings due, Motorola analyst meeting; after-the-bell earnings from Nordstrom and Urban Outfitters.
TUESDAY: PPI, Treasury international capital, industrial production, housing market index, Microsoft shareholders meeting, Atlanta Fed Pres Lockhart speaks; Earnings from Home Depot, Wal-Mart and TJX.
WEDNESDAY: Weekly mortgage applications, CPI, housing starts, oil inventories, St. Louis Fed Pres Bullard speaks, GM IPO pricing, LA auto show kicks off, Qualcomm analyst meeting; Earnings from Target and Applied Materials.
THURSDAY: Weekly jobless claims, leading indicators, Philadelphia Fed survey, Cisco shareholder meeting; Earnings from Dell and Gap.
FRIDAY: Bernanke speaks at ECB Central Banking Conference, Harry Potter movie premieres.
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