U.S. stocks powered up by merger flurry

NEW YORK (MarketWatch) -- U.S. stocks were trading higher on Monday, as positive momentum from a flurry of mergers, including a mega deal in the banking sector, offset bad news for Pfizer Inc.

The Dow Jones Industrial Average was up 69 points at 12,262.

Pfizer fell 11% after news it halted development of a once-promising cholesterol drug.

But the impact on the blue-chip average was offset by a spate of mergers, especially news that Bank of New York Co. agreed to buy Mellon Financial Corp. to create a $43 billion giant ranked as the world's largest custodian of financial assets.

The S&P 500 rose 9 points to 1,406, and the Nasdaq Composite gained 34 points to 2,447.

Financial shares were providing strong support, including for the Dow Industrials, where American Express Co. , Citigroup Inc. and JP Morgan Chase & Co. all advanced.

The technology sector also received a boost from merger news after news that LSI Logic Corp. said it will buy Agere for $4 billion.

"You have a lot of different sectors seeing consolidation, but you also have some negative news from Pfizer," said Art Hogan, chief market strategist at Jefferies & Co.

"On the whole, I would say there is more good news than bad news. As we stare down the week, we may be able to get some up days."

Trading volume was 496 million shares on the New York Stock Exchange and 737 million on the Nasdaq.

Advancers beat decliners 23 to 8 on the Big Board and 20 to 7 on the Nasdaq.

By sector, banks , semiconductors and airlines were strong, while oil , precious metals miners and pharmaceuticals were weak.

On Friday, equities began the final month of the year on a bumpy note.

Stocks fell, but closed off their lows, after the latest monthly manufacturing report from the Institute for Supply Management showed the manufacturing sector contracted in November.

The news fueled fears of a hard landing for the economy.

Chicago Federal Reserve President Michael Moskow, speaking to reporters after a speech early Monday, reiterated his previous view that the economy will slow only moderately.

News that the pending-home-sales index dropped in October had little immediate impact on the stock market.

Meanwhile, Hugh Johnson, chairman of Johnson Illington Advisors, tells MarketWatch that stocks should continue to move even higher in what remains a "liquidity-driven market." Listen to Johnson.

"It's a liquidity-driven market and that's very, very positive and probably implies that stock prices will move even higher," he said, even if he believes the market is about 6% overvalued currently.

Monday's flurry of mergers, Johnson said, is an example of the strength of corporate profits and cashflow, adding that companies have a "strong need to do something with that cash."

Other markets

Treasurys were under pressure in the early going, following heavy overnight sales by Japanese and European accounts. The benchmark 10-year note fell 1/32 to 101-15/32 with a yield of 4.437%.

The dollar showed a minor improvement after falling sharply last week in the wake of the weak manufacturing reports.

The modest gains "appear to be largely a function of a bout of profit-taking," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

"Some short-term players appear to have turned a little cautious" ahead of Thursday's European Central bank meeting and Friday's U.S. employment figures, he said.

The dollar was last up 0.1% against the euro and up 0.2% against the yen.

Gold rose 10 cents to $650.60 an ounce.

Crude oil futures fell $1.07 to $62.36, after the president of the Organization of Petroleum Exporting Countries said that supplies continue to outpace demand, despite recent efforts by the oil cartel to cut production. See full story.

Merger Monday

Poultry producers Pilgrim's Pride Corp , rose 11%, after agreeing to acquire Gold Kist Inc. for about $1.1 billion and $144 million in debt.

Reckson Associates Realty Corp. dropped 5% after receiving a $3.3 billion offer from a group led by investor Carl Icahn.

Station Casinos gained 18% after receiving an acquisition proposal that values its common shares at $82 each from Fertitta Colony Partners LLC, an entity that includes Station's chairman and president.

Marshall & Illsey Corp rose 1% after news it will buy united Heritage Bankshares of Florida Inc. for about $217 million in stock.

Elsewhere, Home Depot Inc. , a Dow component, gained 36 cents to $39.33. It said in a regulatory filing that it has had no discussion about a potential leveraged buyout or recapitalization. See full story.

Bank of America was off 1.7%. Late Friday the bank said that Alvaro de Molina, who rose from the ranks in investment banking to the executive offices, is stepping down as chief financial officer a little more than a year after he took the job. See full story.