Blue Chips Rise on Earnings, M&A Talk

Blue chips rose Thursday as better-than-expected economic data, merger activity, and healthy company earnings lifted the mood on Wall Street, but shares of Swedish telecoms equipment maker Ericsson dragged on the Nasdaq.

The Dow Jones industrial average (search) was up 85.50 points, or 0.80 percent, at 10,749.61. The Standard & Poor's 500 Index (search) was up 5.02 points, or 0.42 percent, at 1,197.01. The Nasdaq Composite Index (search) was up 0.55 point, or 0.03 percent, at 2,053.10.

After the closing bell, Dell Inc. (DELL), the world's largest personal computer maker, posted sales just shy of Wall Street expectations. Its shares fell 2.5 percent to $40.52 in after-hours trading.

The tech sector was hoping Dell would make up for bellwether Cisco Systems Inc. (CSCO), whose disappointing outlook helped to send the Nasdaq market sharply lower on Wednesday.

American International Group Inc. (AIG), the world's largest insurer by market value, helped push the blue-chip Dow average higher, jumping 3.9 percent a day after it said fourth-quarter profit rose 11 percent.

A jump in oil prices helped energy companies such as ExxonMobil Corp. . High oil prices hurt equities in general because they weigh on corporate profits and consumer spending, but shares of energy companies gain.

"The oils are extremely strong," said Peter Boockvar, equity strategist at Miller Tabak & Co. "But we are seeing two different markets, as the Nasdaq is doing nothing and technology is doing nothing."

Shares of Sweden's Ericsson (ERICY) traded in the United States fell 8 percent, or $2.56, to $28.83 after the company reported below-consensus fourth-quarter gross profit margin.

Stocks were also boosted by the Senate's passage of a bill aimed at curbing class action lawsuits. The measure was sought by business and is part of President Bush's drive to overhaul the civil justice system.

AIG (AIG), the world's largest insurer by market value, rose $3.28 to $72.59. Insurers were helped by the Senate's decision on class-action cases. Corporations usually claim large legal payouts on their insurance, so legislation restricting lawsuits would likely save insurers money.

"Talk about the class-action reform in Congress could help a lot of the property and casualty stocks. We're seeing some good action in the other insurance names," said Boockvar.

Americans' appetite for foreign goods, from crude oil and cars to imported wine, cheese and other food products, hit all-time highs in 2004 as the U.S. trade deficit soared to a record of $617.7 billion, the Commerce Department (search) reported. The deficit for all of last year was 24.4 percent above the previous record, an imbalance of $496.5 billion in 2003. The U.S. deficit with China also set a record, making it the largest imbalance ever recorded with a single country.

Separately, the number of Americans filing new claims for unemployment benefits totaled 303,000 last week, a decline of 13,000 from the previous week, according to the Labor Department (search). It put new filings at their lowest level since October 2000 and underscored that the labor market is continuing to show strength.

The U.S. dollar fell against other major currencies, and gold prices rose, sending the Philadelphia Gold and Silver Index up 3.90 percent. Crude futures climbed $1.64 to settle at $47.10 per barrel on the New York Mercantile Exchange (search) after an international energy-market watchdog raised its forecast for daily oil demand in 2005 and said demand for OPEC crude in the first quarter would outstrip supply; the AMEX Oil Index was up 2.16 percent.

Telecom giant Verizon Communications Inc. (VZ) was down 2 cents at $36.04 on a report it was looking to take over MCI Corp.(MCI), which has been awash in takeover speculation following SBC Communications Inc.'s (SBC) $16 billion deal for AT&T Corp. Verizon recently floated an informal $6.3 billion offer for MCI, according to The Wall Street Journal, citing unidentified sources. MCI was down 40 cents at $20.46.

Health insurer Aetna Inc. (AET) rose 4.2 percent, or $5.43, to $133.98, after reporting a 22 percent rise in fourth-quarter earnings on higher premiums and fees, beating expectations. The company also declared a 2-for-1 stock split.

Sara Lee Corp. (SLE) surged 4.1 percent, or 95 cents, to $23.92, after naming a new chief executive officer and announcing plans to sell or spin off business lines worth $8.2 billion in annual revenue, or 40 percent of sales. Brenda Barnes replaces Steve McMillan, who will remain chairman, as the company sharpens its focus on food, beverage and household products.

Trading was active, with 1.5 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 2.1 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Advancers outnumbered decliners on the New York Stock Exchange by 6 to 5, while decliners outnumbered advancers by about 8 to 7 on Nasdaq.

The Russell 2000 index, which tracks smaller company stocks, was up 1.10, or 0.18 percent, at 626.81.

Overseas, Japan's Nikkei stock average added 0.70 percent. In Europe, France's CAC-40 rose 0.02 percent, Britain's FTSE 100 gained 0.19 percent and Germany's DAX index was down 0.26 percent.

Reuters and the Associated Press contributed to this report.