Stocks Rally Late in Session on Mergers

Stocks turned upward to end higher Monday on a flat day of trading after reports of several mergers battled with climbing oil prices for investor attention.

The Dow Jones industrial average (search) ended higher 38.94 points, or 0.38 percent, at 10,384.34. The technology-laced Nasdaq Composite Index (search) gained 12.32 points, or 0.63 percent, to end at 1,979.67, while the broader Standard & Poor's 500 (search) index was up 7.49 points, or 0.64 percent, to close at 1,178.84.

The higher price of oil was one of the chief concerns of investors Monday. U.S. light crude settled up $1.07 to $52.03 on the New York Mercantile Exchange after traders responded to speculation that U.S. refineries might be unable to match demand in the latter half of the year.

While stocks seesawed for most of the day, they regained traction toward the end of the session as investors reasserted confidence that the flurry of merger announcements signaled a healthy economy.

Investors also seemed to have more confidence in the Federal Reserve's ability to balance economic growth with rising prices, keeping both inflation and the specter of an economic slowdown in check. And finally, with the major indexes well off their 2005 highs, investors saw a chance to find bargains.

Heading the list of reported mergers Monday was Duke Energy Corp. (DUK), which agreed to buy Cinergy Corp. (CIN) in an $9 billion all-stock deal to build its utility business. Duke Energy lost 54 cents to $28.82 while Cinergy climbed $1.94 to $42.32.

In other deal news, E-Trade Financial Corp. (ET) formally expressed an interest in buying rival Ameritrade Holding Corp. (AMTD) — a move that could further consolidate the shrinking world of online trading — The Wall Street Journal reported, citing people familiar with the matter. E-Trade rose 77 cents to $12.70, while Ameritrade surged $2.11, or 18.7 percent, to $13.42.

Merger negotiations between US Airways Group (search) and America West Holdings (AWA) picked up momentum last week, with the carriers hoping to hammer out a deal ahead of America West's annual meeting May 17, the Journal reported Monday. Several potential investors in a merger are studying a proposed business plan that foresees the combined company operating under the US Airways brand and focusing attention on Midwestern markets while introducing flights to Hawaii, according to people familiar with the matter. America West slipped 8 cents to $4.34.

"With all the questions out there, nobody sees a real reason to stick their neck out," said Mike Viracola, managing director and co-head of equities at Adams Harkness in Boston. "And with nobody out there making bets, the path of least resistance for this market is down."

Dow industrial McDonald's Corp. (MCD) added 74 cents to $30.12 after reporting strong domestic sales in April, offsetting lagging demand in Europe.

General Motors Corp.(GM) ranked as the Dow's second-biggest percentage gainer, climbing 57 cents, or 1.9 percent, to $31.33. On Monday, GM said it will review billionaire investor Kirk Kerkorian's cash tender offer for up to 28 million GM shares at a price of $31 per share.

After the closing bell, GM shares jumped 2.14 percent to $32 on the Inet electronic brokerage network after GM said it was maintaining its regular quarterly dividend for the second quarter at 50 cents a share.

General Electric Co. (GE) gave the biggest lift to the S&P 500 after the conglomerate unveiled a plan to boost investment and increase sales from environmentally friendly technologies. GE shares rose 1 percent, or 38 cents, to $36.23.

Lucent Technologies Inc. (LU) was up 11 percent at $2.87 after an article in financial weekly paper Barron's said the telecom equipment makers' shares are poised to rise as revenues are boosted by its exposure to the growing wireless sector.

Research In Motion Ltd. (RIMM) was up about 3 percent to $69.95 after it said it had reached a major milestone, with more than 3 million subscribers using its popular BlackBerry wireless e-mail device.

The bond market moved lower as investors anticipated a larger surge in supply from a Treasury auction later in the week. The yield on the 10-year Treasury note rose to 4.28 percent from 4.26 percent late Friday. The dollar was mixed against most major currencies, while gold prices also rose.

The move in the bond market also signaled movement of capital from bonds back into stocks. The major indexes have held onto their recent gains, with very little of the frenzied selling that marked April's trading. However, volume remained light and some analysts and traders felt investors remained very tentative. And even bullish analysts agreed that the market will remain sensitive to bad news and will send stocks lower at the first sign of negativity.

Trading in stocks was moderate, with 1.36 billion shares changing hands on the New York Stock Exchange, below the 1.46 billion daily average for last year. About 1.48 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.

Advancing stocks outnumbered decliners on the New York Stock Exchange and Nasdaq by roughly 2 to 1.

The Russell 2000 index of smaller companies was up 6.40, or 1.07 percent, at 602.92.

Overseas, Japan's Nikkei stock average fell 0.19 percent. In Europe, Britain's FTSE 100 closed down 0.17 percent, France's CAC-40 lost 0.33 percent for the session, and Germany's DAX index dropped 0.43 percent.

Reuters and The Associated Press contributed to this report.