NEW YORK – Stocks rose Monday as several acquisitions gave investors reason to buy equities in a market otherwise jittery about the Federal Reserve's meeting this week and the prospect of higher interest rates.
The Dow Jones industrial average shot up 56.19 points, or 0.51 percent, to end at 11,045.28. The Standard & Poor's 500 Index gained 6.06 points, or 0.49 percent, to finish at 1,250.56 and returned to positive territory for the year. The Nasdaq Composite Index rose 12.20 points, or 0.58 percent, to close at 2,133.67.
Shares of companies being bought were among the biggest gainers, while the stocks of the purchasers were some of the biggest decliners. Johnson & Johnson (JNJ), which is spending $16.6 billion to buy the consumer health-care arm of Pfizer Inc. (PFE), was the top drag on the Dow and S&P 500, while Pfizer's stock gave a boost to both.
The U.S.-listed shares of Inco (N) and Falconbridge (FAL) both surged after copper miner Phelps Dodge said it would buy the two nickel-producing companies for about $40 billion in a deal to create a top global copper and nickel miner.
Despite the M&A frenzy, trading was subdued before the Fed's meeting on Wednesday and Thursday. The Fed's policy-setting arm is expected to lift its benchmark lending rate to 5.25 percent and may give an indication of their future actions at meetings in August and September.
Higher rates are seen as a negative for stocks because they cut into consumers' disposable income and raise costs for businesses.
"I think we'll be in for a little more turbulence, not just between now and Thursday, but until the end of summer," said Brian Gendreau, investment strategist at ING Investment Management in New York. "But today's gains are a good sign because they were accompanied by a decline in volatility. As an investor, I'd rather see more smaller gains like today than a couple 100-point moves."
Phelps Dodge (PD) shares fell 8.1 percent, or $6.72, to $76.23 on the NYSE, while U.S.-traded shares of Inco rose 10.2 percent, or $5.95, to $64.21 and Falconbridge shares advanced 5.1 percent, or $2.50, to $51.80.
Mittal Steel's (MT) successful takeover bid of 24.6 billion euros ($30.91 billion) for French rival Arcelor helped lift shares of U.S. steelmakers. U.S. Steel Corp. climbed 3.2 percent, or $2.03, to $66.05 while Nucor Corp. added 1.1 percent, or 54 cents, to $51.91.
Johnson & Johnson shares fell 1.8 percent, or $1.11, to $60.21, while Pfizer shares gained 1.6 percent, or 37 cents, to $23.01.
J&J, the diversified health-care company, forecast its proposed acquisition of the Pfizer unit will put pressure on earnings through 2008.
Shares of orthopedic device makers took a tumble after the U.S. Justice Department sent subpoenas to Zimmer Holdings Inc.
and Biomet Inc. demanding documents related to possible violations of federal antitrust law, both companies said. J&J's DePuy unit also received such a subpoena.
Zimmer (ZMH) stock fell 6.9 percent, or $4.33, to $58.70 on the NYSE and Biomet (BMET) shares dropped 5.2 percent, or $1.80, to $33.18 on Nasdaq. Shares of Stryker Corp. (SYK), another orthopedic company that received a subpoena in the same probe, fell 6 percent, or $2.68, to $42.20 on the NYSE.
New home sales rose 4.6 percent in May, the government said Monday. The data defied Wall Street's forecast for a decline. The stronger-than-expected home sales bolstered shares of home builders, such as KB Home (KBH), up 4 percent, or $1.83, to $47.18 on the NYSE. The Dow Jones index of home builders' shares rose 2.2 percent. ,
Toll Brothers Inc. (TOL) gained 1.9 percent, or 50 cents, to $26.94, and Lennar Corp. , which reported a stronger-than-expected profit on Monday, advanced 2.5 percent, or $1.11, to $45.65.
Trading was light on the NYSE, with about 1.34 billion shares changing hands, far below last year's daily average of 1.61 billion, while on Nasdaq, about 1.43 billion shares traded, below last year's daily average of 1.80 billion.
Advancing stocks outnumbered declining ones by a ratio of 5 to 3 on the NYSE and by about 9 to 6 on Nasdaq.