Stocks held onto modest gains as a better-than-expected report on manufacturing and wave of deal news gave traders cause for optimism.
Select buying in tech stocks, as investors increased their appetite for risk, led the way. Hewlett-Packardand Intel were among the top gainers on the Dow Jones Industrial Average, along with General Motors .
Bank of America and AIG were the biggest decliners.
The tech-heavy Nasdaq outperformed both the Dow and the S&P 500.
Barry Armstrong, a financial planner at Securities America Advisors in Boston, said he’s moving more of his clients’ money into stocks and other investments such as REITS for one very simple reason: “You can’t make any money in cash right now.”
He’s not jumping on the financials bandwagon, instead favoring technology and retail. Armstrong notes that U.S. personal-computer growth is 3 percent, but world-wide it’s 15 percent. He thinks the HPs and Dells of the world are undervalued.
“I am cutting back on foreign stocks,” Armstrong said. “I don’t think the dollar is going to get any weaker.”
Crude oil fell sharply, to between $121 and $122 a barrel, after the Senate passed a bill that would close the so-called Enron loophole and allow for greater oversight of energy trading.
Oil's retreat boosted optimism for the cash-strapped consumer and the stores where they might be spending their money if they weren't pumping into their homes -- and their gas tanks. Retail stocks advanced, with notable gains in JC Penney, Saks and Tiffany.
JCPenney reported its earnings fell 50 percent but beat expectations. Meanwhile, over on Fifth Avenue, Tiffany raised its quarterly dividend and said it expects first-quarter earnings to beat its prior estimates, sending its shares up more than 4 percent.
Earnings are due out after the bell from Kohl's , and Saks reports next week.
Shares of Blockbuster rose after the movie-rental chain reported a profit of 20 cents per share, surpassing expectations by 5 cents.
CNET shares soared more than 40 percent after CBS announced plans to buy CNET for $11.50 per share, or $1.8 billion. CBS Chief Executive Les Moonves announced the deal, which would catapult the broadcast and media giant to one of the top 10 Internet companies, about two hours before trading began. The price tag amounts to a 41 percent premium on CNET's Wednesday closing price of $7.95.
Yahoo shares jumped amid news that billionaire investor Carl Icahn has decided tomove ahead with a proxy fight for the Internet giant, according to sources familiar with the matter. Icahn, who has amassed a large stake in the Internet company, has lined up at least 12 potential board candidates and the deadline for nominating a dissident slate is today.
Elsewhere in technology, HPshares rebounded for a second day after a two-day pounding following news of its plan to acquire IT-services firm EDS .
HP is expected to report earnings after the closing bell.
GMwas among the other big blue-chip gainers after the auto maker reached a tentative agreement with a local unionthat could end a monthlong strike at a Michigan plant that makes some of GM's hottest-selling vehicles. The agreement gave investors hope that GM may finally be coming to terms with the UAW. Another strike is still going on in Kansas and one scheduled to start this week in Ohio was canceled.
General Electric is planning to sell its appliances unit, which could fetch up to $8 billion, the Wall StreetJournal reported. (GE is the parent company of CNBC and this Web site.)
United Airlines and Continental Airlines are in talks to form an alliance that would provide benefits without the carriers having to go through a merger, which Continental rejected last month, according to a person close to the talks.
Blackstone shares slipped after the private-equity and real-estate firm reported it swung to a loss of $93.6 million, or 6 cents a share, compared with a profit of $957.8 million, or 75 cents a share a year earlier.
Among today's economic news, the Philadelphia Federal Reserve reported its May reading of regional manufacturing activity came in at minus 15.6, better than expected. The New York Fed reported its Empire State manufacturing index slippeddropping to minus 3.23in May, worse than expected. Both the Philadelphia and New York readings are closely watched for insight ahead of the national report on manufacturing from the Institute for Supply Management, due out June 2.
Industrial production fell 0.7 percent in April, more than double of what was expected, while capacity utilization dropped to 79.7, the lowest reading since September 2005. Jobless claims rose 6,000, slightly more than expected, last week; the four-week moving average, however, fell to 365,750 from 366,750.
Fed Chairman Ben Bernanke said turmoil in financial markets underscores the need for "generous" capital cushions as big banks. he also said regulators were pushing for more transparency at financial institutions, in a speech delivered at a Chicago banking conference.
Still to Come:
THURSDAY: Earnings from HP and Kohl's after the bell
FRIDAY: Housing starts; consumer sentiment
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