Mergers spur stocks

NEW YORK (CNNMoney.com) -- A wave of merger news and a slump in oil prices helped fire up the stock market near midday Monday, with investors returning with gusto after last week's declines.

Investors also kept an eye on Dow stock Pfizer, which slumped on news that it has halted development of a key new drug meant to treat heart disease.

The tech-fueled Nasdaq (up 30.98 to 2,444.19, Charts) composite added 1.4 percent around 2-1/2 hours into the session.

The Dow Jones industrial average (up 59.44 to 12,253.57, Charts) added 0.5 percent, but the world's most widely watched stock market gauge 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 7.98 to 1,404.69, Charts) index climbed about 0.6 percent.

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 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 $3.59 to $39.07, Charts) and Mellon Bank (up $1.94 to $41.99, Charts) announced a $16.5 billion deal the companies are calling a merger of equals. Bank of New York shares jumped 9.5 percent, while Mellon Bank shares gained 4.5 percent.

The deal gave a boost to a variety of financial shares, lifting the Philly Bank Sector (Charts) index by 1.5 percent.

Station Casinos (up $12.80 to $81.90, Charts) has received a $4.7 billion management-led buyout offer to go private. Shares gained 18.5 percent.

And LSI Logic (down $1.26 to $9.30, Charts) said it will buy Agere Systems (up $1.92 to $19.71, Charts) for $4 billion. LSI fell almost 12 percent, while Agere jumped 11 percent.

Among technology gainers, Internet stocks were particularly upbeat, with Yahoo! (up $0.54 to $27.03, Charts) and eBay (up $0.73 to $32.23, Charts) both up more than 2 percent. The Goldman Sachs Internet (Charts) index gained 1.6 percent.

Other big technology gainers included Intel (up $0.38 to $21.31, Charts), Applied Materials (up $0.63 to $18.36, Charts), Cisco Systems (up $0.51 to $27.20, Charts) and Oracle (up $0.26 to $19.07, Charts).

Pfizer (down $3.09 to $24.77, Charts), a Dow stock, plunged 12.5 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 more than 2 percent slide in crude oil prices weighed on the oil service sector stocks including Exxon Mobil (down $0.09 to $77.11, Charts), Valero Energy (down $0.70 to $55.15, Charts) and Sunoco (down $1.51 to $67.47, Charts).

Market breadth was positive. On the New York Stock Exchange, winners beat losers by nearly 3 to 1 on volume of 560 million shares. On the Nasdaq, advancers trounced decliners by more than two to one.

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 were little changed, with the yield on the benchmark 10-year note at 4.43 percent, little changed from late Friday. Bond prices and yields move in opposite directions.

COMEX gold fell 80 cents to $649.80 an ounce.

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