Market closes up on takeovers, bailout

Stocks gained steadily Monday on a round of corporate takeovers and reports that Europe's bailout fund will be larger than anticipated. The Dow Jones industrial average was up nearly 130 points in the late afternoon before backing off the high for the close. The Nasdaq composite index turned positive for the year.

Mattel and J.M. Smucker were among companies that rose after announcing acquisitions.

Investors are still waiting for a resolution to Europe's debt problems. European leaders said they made progress at a weekend summit and plan to unveil concrete plans for containing the crisis by Wednesday.

Even with concerns about Europe, U.S. companies are still reporting bigger profits. "Although there is a good deal of economic and political uncertainty in the world, we are not seeing it much in our business at this point," Caterpillar chief executive Doug Oberhelman said.

The maker of construction equipment reported a 44 percent surge in income, more than Wall Street analysts were expecting, thanks to strong growth in exports. The company said it expected the global economy to continue recovering, albeit slowly.

The Dow Jones industrial average closed up 104.8 points, or 0.9 percent, at 11,913.6. Caterpillar jumped 5 percent, the most of the 30 companies in the Dow.

The Standard & Poor's 500 index closed with a gain of 15.9 points, or 1.3 percent, at 1,254.2. The Nasdaq composite closed up 62 point, or 2.4 percent, at 2,699.4. The gains turned the Nasdaq positive for the year. The S&P 500 is the only major market index that remains lower than where it started the year.

The Russell 2000 index of small companies rose 3 percent as investors moved money into higher-risk assets.

Strong earnings reports from McDonald's Corp. and other big U.S. companies last week drove the Dow Jones industrial average to its third straight weekly gain. The S&P 500 finished the week at its highest level since Aug. 3, just before Standard & Poor's downgraded the U.S. government's credit rating.

Other major U.S. companies due to report earnings this week include UPS Inc., Ford Motor Co. and Procter & Gamble.

Analysts expect companies in the S&P 500 to report earnings growth of 14 percent for the third quarter, according to data provider FactSet. They expect a 10 percent gain in revenue.

Expenses are also expected to climb. Higher costs for raw materials helped drag down income 8 percent at Kimberly-Clark Corp., which reported results Monday. The stock fell 5 percent. The company is a major consumer products maker whose brands include Huggies and Kleenex.

Higher costs also hurt cigarette maker Lorillard, which reported a 3 percent drop in income. Lorillard's stock fell 0.8 percent.

A series of corporate deals helped lift the market, said Phil Orlando, chief equity strategist at Federated Investors. "This is telling us that companies think stocks are cheap, and they're willing to spend some of the cash that's sitting around on their balance sheets," he said.

Deals announced included:

-- HealthSpring Inc. jumped 33 percent after Cigna Corp. said it will buy the health insurer for about $3.8 billion in cash. Cigna fell 0.4 percent.

-- RightNow Technologies Inc. gained 19 percent after Oracle Corp. said it will buy the tech service company for about $1.5 billion. Oracle rose 0.8 percent.

-- Mattel Inc. rose 2 percent after it agreed to buy Hit Entertainment, the owner of the Thomas & Friends and Barney brands, for $680 million in cash.

-- The J.M. Smucker Co. added 1 percent after it bought most of Sara Lee Corp.'s North American food service coffee operations for about $350 million.

Asian and European markets rose earlier Monday after Japan said its exports grew for a second straight month in September and a report showed China's industrial production returned to growth in October. Japan's Nikkei 225 index rose 1.9 percent, Hong Kong's Hang Seng index rose 4.1 percent and South Korea's Kospi index rose 3.3 percent.