Bulls back in control

NEW YORK (CNNMoney.com) -- Wall Street recovered nicely Monday from Friday's big selloff, with the Dow climbing over 100 points, following some dealmaking news and strong earnings from the drugmaker Merck.

The Dow Jones industrial average (up 105.19 to 13,956.27, Charts) soared by as much as 121 points and was 0.7 percent higher, climbing back towards the 14,000 mark, which it surpassed for the first time ever just last week.

The broader S&P 500 (up 9.17 to 1,543.27, Charts) also jumped 0.6 percent, while the tech-fueled Nasdaq (up 9.11 to 2,696.71, Charts) rose over 0.3 percent.

"Every Monday that we have significant merger activity we see a pop in futures and that carries through the [market] open," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. "That makes for a stronger market that day and we saw that this morning."

Offshore drilling firms Transocean and rival GlobalSantaFe said Monday that they agreed to a merger, giving the companies a combined market capitalization of about $48 billion.

Transocean (up $7.34 to $117.31, Charts) shares climbed nearly 7 percent on the news, while GlobalSantaFe (up $4.15 to $78.89, Charts) stock rose over 5 percent on the New York Stock Exchange.

Private equity firm Cerberus Capital Management also announced a $4 billion deal for the equipment rental company United Rental (up $0.68 to $33.05, Charts), representing a 6.6 percent premium to the company's Friday closing price.

Computer maker Hewlett-Packard (down $0.15 to $48.39, Charts, Fortune 500) announced plans Monday to purchase Opsware Inc. for $1.6 billion, in an effort to expand its business software holdings.

Better than expected earnings from drugmakers Merck and Schering-Plough (down $0.17 to $31.32, Charts, Fortune 500) and energy services firm Haliburton (up $1.51 to $38.08, Charts, Fortune 500) also provided support to stocks in a session with no major economic reports on tap.

Dow component Merck (up $4.18 to $53.20, Charts, Fortune 500) shares jumped over 8 percent after the company reported a 12 percent increase in profits and raised its 2007 earnings forecast.

"If you take the bulk of earnings so far, we've done pretty well in relation to expectations," said Sparks.

Stocks retreated Friday, with the 30-stock Dow falling nearly 150 points amid continued fears about the housing market and some weak corporate results from Dow component Caterpillar (down $0.83 to $82.37, Charts, Fortune 500) and Web search giant Google (down $3.77 to $516.35, Charts, Fortune 500).

In other corporate news, British bank Barclays (up $1.78 to $60.41, Charts) sweetened its takeover offer for ABN Amro (up $0.13 to $50.97, Charts) to $93 billion, although the new offer still falls short of the bid from a rival group led by Royal Bank of Scotland.

Netflix (down $2.00 to $17.63, Charts) shares tumbled 10 percent after the video rental company cut prices Sunday on two of its subscription plans by $1. Netflix is scheduled to report earnings after the closing bell Monday.

Other earnings due after the bell include Dow component American Express (up $0.26 to $64.77, Charts, Fortune 500), as well as tech bellwether Texas Instruments (up $0.55 to $38.56, Charts, Fortune 500).

Oil prices fell sharply, as U.S. light crude for September lost 79 cents to $75 a barrel on the New York Mercantile Exchange.

Treasury prices edged lower, leaving the yield on the 10-year note at 4.96 percent, up slightly from 4.95 percent reached late Friday. Bond prices and yields move in opposite directions.

COMEX gold for August fell $3.40 to $681.30 an ounce.

Market breadth was positive. Advancers topped decliners by 3 to 2 on the New York Stock Exchange on volume of 842 million shares. Winners beat losers on the Nasdaq by 4 to 3 on volume of 1.24 billion shares.

The dollar was stronger against the euro and the yen.

Major Asian markets finished the session lower Monday, while European stocks also ended higher.