Stocks surge on merger talk

NEW YORK (CNNMoney.com) -- Stocks rocketed out of the gates Wednesday, as takeover talk helped soothe investors worried that a tightening credit market would curtail the recent run of mergers and acquisitions.

Bond prices slumped, boosting the corresponding yields, as the recent 'flight to safety' by investors seemed to be dissipating, further suggesting worries about the credit market are dampening.

The Dow Jones industrial average (up 106.82 to 13,197.68, Charts) jumped 100 points, or 0.8 percent in the early going, while the broader S&P 500 (up 13.69 to 1,460.81, Charts) index gained 1 percent. The tech-fueled Nasdaq Composite (up 24.81 to 2,546.11, Charts) index gained 1 percent.

The Nasdaq and S&P 500 gained Tuesday, as investors welcomed a meeting among Federal Reserve Chairman Bernanke, Senator Dodd and Treasury Secretary Paulson on the problems in the financial markets.

The meeting seemed to remind investors that the central bank and Washington are aware of the pummeling the financial markets have taken over the last few weeks on concerns about the credit and mortgage markets.

The meeting also raised hopes that the Federal Reserve will cut the fed funds rate at its Sept. 18 policy meeting. However, economists believe that the central bank is unlikely to make a cut ahead of the meeting, according to a recent survey.

Stocks gained Wednesday morning, thanks to those factors and the merger speculation, including reports that brokerages TD Ameritrade (up $0.80 to $17.15, Charts) and E*Trade (up $0.51 to $16.08, Charts) are in talks to merge.

NYMEX Holdings (up $6.95 to $125.73, Charts) also confirmed late Tuesday that it has discussed selling itself with potential suitors, Reuters reported. NYMEX is the parent company of the New York Mercantile Exchange.

In other news, Toll Brothers (up $0.61 to $21.70, Charts, Fortune 500) reported slumping earnings and warned about its outlook. However, the luxury homebuilder's earnings were nonetheless stronger than expected, sending shares about 3 percent higher.

Treasury prices slumped, raising the benchmark 10-year note yield to 4.64 percent from 4.59 percent late Tuesday. Bond prices and yields move in opposite directions.

In currency trading, the dollar slipped versus the euro and rose versus the yen.

U.S. light crude oil for October delivery rose 38 cents to $69.95 a barrel on the New York Mercantile Exchange.