NEW YORK (CNN/Money) -
U.S. stocks rallied Tuesday, as investors jumped back in after a three-day holiday weekend, egged on by a number of multi-billion dollar mergers, including Cingular's $41 billion buy of AT&T Wireless.
The Nasdaq composite (up 26.79 to 2080.35, Charts) gained 1.3 percent, the Standard & Poor's 500 (up 11.18 to 1156.99, Charts) index advanced about 1 percent and the Dow Jones industrial average (up 87.03 to 10714.88, Charts) rose about 0.8 percent.
The major indexes struggled in mixed trade last week, ending lower on Friday. Monday, the market was closed for the President's Day holiday.
But Tuesday, stocks snapped back, with investors cheering the deal in telecom, as well as smaller deals in the financial sector and the latest developments in Comcast's attempt to buy Walt Disney.
"The merger news is good, but people already know that as conditions continue to improve, there will be more merger news," he added. "I think on a broader level, the market is still basically trading sideways as we digest the gains of the last year, and that kind of trade is likely to continue for the next few weeks."
What may sway the market to the upside in the short-term is the spate of retail earnings due in the next week or so, said Michael Carty, principal at New Millennium Advisors.
"The retail earnings are likely going to be strong and that helps the market," Carty said.
Wednesday's one retailer is Jones Apparel, due to report its results before the bell. The company is forecast to have earned 32 cents, according to Reuters Research estimates, down from 50 cents a year earlier.
Likely to help chip stocks Wednesday morning was news after the close of trade from Broadcom (BRCM: Research, Estimates) that it will hold a call after market close Wednesday to discuss its "stronger business outlook." Shares gained more than 6 percent in after-hours trade.
Also due Wednesday: economic reports on January housing starts and building permits before the bell. Both are forecast to show slight pullbacks from the previous month.
Tuesday's market
Cingular Wireless, the No. 2 cell phone service provider, won the bidding war with Europe's Vodafone (VOD: up $0.91 to $26.67, Research, Estimates) for AT&T Wireless (AWE: up $1.96 to $13.78, Research, Estimates) and will buy the company for about $41 billion. The deal will create the biggest mobile phone company in the U.S. Cingular is jointly owned by Baby Bells BellSouth (BLS: down $0.49 to $29.06, Research, Estimates) and SBC Communications (SBC: down $0.18 to $24.87, Research, Estimates).
The news sent AT&T Wireless up 16.6 percent and the stock topped the NYSE's most-actives list. However, BellSouth and SBC sold off. News that it dropped out of the bidding sent Vodafone up 3.5 percent in U.S. trading.
Other mobile phone network operators also rallied on the news, with Nextel Communications (NXTL: up $1.66 to $28.77, Research, Estimates) gaining about 6 percent and Sprint PCS (PCS: up $0.73 to $9.95, Research, Estimates) gaining almost 8 percent.
The deal was one of several dominating trade Tuesday.
In the day's other merger news, the board of Walt Disney (DIS: down $0.02 to $26.90, Research, Estimates) rejected Comcast's (CMCSA: up $0.85 to $30.75, Research, Estimates) unsolicited $48 billion takeover bid, calling it too low. Disney shares edged lower, while Comcast shares saw mild gains. Following a gain of about 12 percent in Disney's stock since the offer became public Wednesday, sources close to Comcast said Tuesday it was not interested in buying Disney at the current price.
Two regional deals heated up the financial sector.
North Fork Bancorp. (NFB: down $0.38 to $43.37, Research, Estimates) said it would buy fellow New York bank GreenPoint Financial (GPT: down $1.58 to $45.25, Research, Estimates) for $6.3 billion in stock. Northfork shares were little changed, while GreenPoint slipped 3.3 percent on the news.
National City (NCC: down $0.83 to $34.56, Research, Estimates) said it will buy Provident Financial Group (PFGI: up $3.87 to $38.70, Research, Estimates) for about $2.1 billion, in a combination of two of Ohio's biggest banks. National City lost 2.3 percent, while Provident's stock soared more than 11 percent.
Among other movers, Caterpillar (CAT: up $2.10 to $79.52, Research, Estimates) added 2.7 percent and was the Dow's biggest gainer after the company reported that worldwide sales of the its machines rose 11 percent in the three months that ended in January, versus a year earlier.
Market breadth was positive. On the New York Stock Exchange, where 1.38 billion shares traded, advancers beat decliners by more than 12 to five. On the Nasdaq, gainers outnumbered losers by more than five to three on volume of 1.59 billion shares.
The market was also supported by the morning's upbeat economic reports. The Federal Reserve Bank of New York's report on manufacturing in the state showed a surprise jump to a record high of 42.05 in February, up from the previous month. Economists were expecting it to decline. In addition, a separate report showed industrial output surged in January.
Bond prices were virtually flat. The 10-year note lost 1/32 of a point in price, with its yield at 4.04 percent, the same as late Friday. The dollar was mixed to weaker versus the yen and euro.
NYMEX light sweet crude oil prices rallied 76 cents to settle at $34.86 a barrel. COMEX gold gained $5.70 to settle at $416.50 an ounce.
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