Stocks Rise on Merger News, November Sales

Investors pushed stocks substantially higher Monday as Wall Street greeted a spate of corporate merger news and a climb in retail sales as signs of continued economic improvement. The Standard & Poor’s 500 index set a three-year high.

The bond market was calm ahead of today’s Federal Reserve meeting. Policymakers are expected to raise their benchmark short-term rate from 2% to 2.25%, the fifth increase this year.

The government’s latest report on retail sales added to evidence suggesting the economy was in good health.

The Commerce Department said retail sales rose 0.1% in November, better than the flat sales economists had expected. Taking auto sales out of the equation, retail sales were up 0.5%. Wall Street had expected a 0.3% rise excluding autos.

“I think the retail sales numbers helped, alleviating a lot of the concern over holiday sales prospects. And then on top of that you have all this merger activity,” said Bryan Piskorowski, market strategist for Wachovia Securities. “Mid-month is typically pretty quiet, but this news is bringing some people back into the market.”

The Dow Jones industrial average rose 95.10, or 0.9%, to 10,638.32. It was the Dow’s best closing level since March 1. The index is now up 1.8% this year.

Broader stock indicators also rallied. The S&P; 500 rose 10.68 points, or 0.9%, to 1,198.68, the highest close since Aug. 7, 2001. The index is up 7.8% this year.

The Nasdaq composite gained 20.43 points, or 1%, to 2,148.50, nearing its 2004 closing high of 2,153.83 reached in Janiary. Nasdaq is up 7.2% this year.

Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange and by a somewhat narrower margin on Nasdaq.

A small rise in near-term oil futures did little to rattle investors. Crude was quoted at $41.01 a barrel, up 30 cents, in New York, still near a five-month low.

The recent flurry of takeover deals is adding to Wall Street’s sense of optimism, analysts say. The deal wave suggests rising confidence in the economy on the part of corporate executives.

“I think the economy is doing pretty well, better than a lot of people expected,” said Bill Groenveld, head trader for VFinance Investments.

The Fed is expected to signal the same in its announcement today. Many bond investors also are counting on the Fed to repeat its view that inflation pressures are contained.

Long-term bond yields rose sharply at the start of the month but have since pulled back, indicating that investors aren’t worried about inflation, traders say. The 10-year Treasury note yield ended at 4.15% on Monday, unchanged from Friday.

The dollar fell against both the euro and the yen as some traders took advantage of last week’s rally in the U.S. currency to renew bets that the dollar will weaken amid growing trade and budget deficits.

The euro rose to $1.331 from $1.323 on Friday. The dollar dropped to 104.73 yen from 105.21.

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In other market highlights:

* Corporate acquisitions were the talk of Wall Street. Software maker Oracle gained $1.35 to $14.63 after it finally prevailed in its long-running quest to buy PeopleSoft. PeopleSoft surged $2.47 to $26.42.

Sprint and Nextel Communications were up on reports that they were near completing a $36-billion merger pact. Sprint added 30 cents to $24.44 and Nextel climbed 23 cents to $29.99.

Verizon Communications added 48 cents to $41.28 on news that its wireless division was preparing a counter-bid for Nextel.

Dow component Honeywell jumped $1.14 to $36.45 after announcing plans to purchase British industrial holding company Novar for $1.7 billion.

* Retail stocks were mixed on the November sales numbers. Limited Brands picked up 39 cents to $23.75 and Nordstrom added 46 cents to $45.46. But Federated Department Stores lost 83 cents to $54.82 while Kohl’s gave up 28 cents to $46.39.

* Among apparel makers, Coach gained $2.24 to $55.86, Quiksilver picked up 22 cents to $29.72 and Columbia Sportswear dropped 56 cents to $57.82.

* Boeing rose 25 cents to $52.67 despite scrubbing the second straight launch of its new Delta 4 rocket. After the market closed, Boeing said it would raise its quarterly cash dividend 25% to 25 cents a share.

* Electronic Arts led video-game makers higher after a J.P. Morgan Securities analyst said shares of the Redwood City, Calif., game maker might advance over the next two to three years as new game consoles go on sale. He raised his rating on Electronic Arts, Take-Two Interactive Software and THQ of Calabasas to “overweight” from “neutral.”

Electronic Arts gained $3.38 to $57.57. Take-Two, which makes the “Grand Theft Auto” series of carjacking video games, added $1.71 to $35.42. THQ, the maker of “Wrestlemania” video games, rose 75 cents to $23.48.