Big mergers drive big rally

NEW YORK (CNNMoney.com) -- Stocks surged Monday, pushing the Dow up about 100 points and sending the S&P 500 near a fresh six-year high, as investors welcomed a slew of merger news and a slump in oil prices.

The rally came despite a big drop in Pfizer, one of 30 stocks in the Dow industrials, with the No. 1 drugmaker's stock slumping on news that it abruptly halted development of a key new drug meant to treat heart disease.

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The tech-fueled Nasdaq (up 39.02 to 2,452.23, Charts) composite added 1.6 percent with around 2 hours left in the session.

The Dow Jones industrial average (up 103.02 to 12,297.15, Charts) added 0.8 percent, but would have been higher were it not for Pfizer. The drop in Pfizer stock cut about 25 points off of the advance.

The broader Standard & Poor's 500 (up 12.98 to 1,409.69, Charts) index climbed about 0.9 percent. Should it close where it stood at 2:00, it would be at the highest point since Nov. 7, 2000.

Stocks rose from the get-go, with investors recharging the recent rally after a one-week respite thanks to a trio of multi-billion dollar deals and a selloff in oil prices.

"It's December, it's a Monday, giddy up!" said David Briggs, head of equity trading at Federated Investors.

He was referring to both the positive tone of the market Monday and the historical tendency for December to be a strong month for the market, particularly in the first week.

"It's running on momentum and the M&A news," Briggs said, noting that investors began to get back into rally mode late Friday, enabling the market to close well off its lows that day, and setting stocks up for gains on Monday.

"My concern is that it seems overextended in the short term," he said.

The major gauges slipped Friday at the end of a tough week in which slowdown worries preyed on investors' confidence.

After the retreat, investors were willing to move back into stocks Monday, particularly technology, with the Nasdaq having been hit the hardest last week.

The morning brought a number of big company deals.

In the financial sector, Bank of New York (up $4.07 to $39.55, Charts) and Mellon Bank (up $2.44 to $42.49, Charts) announced a $16.5 billion deal the companies are calling a merger of equals. Bank of New York shares jumped 11.5 percent, while Mellon Bank shares gained 6 percent.

The deal gave a boost to a variety of financial shares, lifting the Philly Bank Sector (Charts) index by 1.9 percent.

Station Casinos (up $13.85 to $82.95, Charts) has received a $4.7 billion management-led buyout offer to go private. Shares gained 18.5 percent.

And LSI Logic (down $1.47 to $9.09, Charts) said it will buy Agere Systems (up $1.48 to $19.27, Charts) for $4 billion. LSI fell 13 percent, while Agere jumped 9 percent.

Shares of U.S. Steel (up $3.02 to $76.02, Charts) rose more than 3 percent after the company said that it is on the hunt for potential takeover targets in the raw materials area.

That gave a boost to others in the sector, with the Dow Jones U.S. Steel index up more than 5 percent.

Among technology gainers, Internet stocks were particularly upbeat, with Yahoo! (up $0.51 to $27.00, Charts) and eBay (up $0.87 to $32.37, Charts) both up more than 2 percent. The Goldman Sachs Internet (Charts) index gained 1.7 percent.

Other heavily-traded advancers included Intel (up $0.49 to $21.42, Charts), Applied Materials (up $0.76 to $18.49, Charts), Cisco Systems (up $0.59 to $27.28, Charts), Sun Microsystems (up $0.22 to $5.61, Charts) and Oracle (up $0.42 to $19.23, Charts).

Pfizer (down $3.12 to $24.74, Charts), a Dow stock, plunged 11.1 percent on news that it has stopped developing a new experimental heart disease treatment because a study resulted in an unexpected number of deaths.

A slide in crude oil prices weighed on the oil service sector stocks including Exxon Mobil (down $0.13 to $77.07, Charts), Valero Energy (down $0.63 to $55.22, Charts) and Sunoco (down $1.51 to $67.47, Charts).

But it was good news for companies that depend on fuel, such as airline stocks, which rallied. The Amex Airline (Charts) index gained 2 percent, thanks to advancers such as Continental (up $1.39 to $41.68, Charts) and Jetblue Airways (up $0.40 to $13.78, Charts).

Other companies benefiting from lower oil prices included railroad and trucking stocks, all of which lifted the Dow Jones Transportation (up 72.12 to 4,779.29, Charts) average by 1.5 percent.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by 3 to 1 on volume of 860 million shares. On the Nasdaq, advancers trounced decliners by seven to three on volume of 1.3 billion shares.

U.S. light crude oil for January delivery fell 93 cents to $62.50 a barrel on the New York Mercantile Exchange.

The dollar recovered some after hitting a 20-month low versus the euro last week. The greenback also inched higher versus the yen.

Treasury prices turned higher, lowering the yield on the benchmark 10-year note to 4.42 percent from 4.43 percent late Friday. Bond prices and yields move in opposite directions.

COMEX gold fell 50 cents to $650.10 an ounce.

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