Strong retail sales, Caterpillar deal drive stocks

NEW YORK — Stocks rose Monday following a spike in corporate dealmaking and news that retail sales jumped to the highest level in seven months in October.

Consumer spending rose 1.2 percent last month thanks to higher demand for automobiles, the Commerce Department reported. The gain was nearly double what analysts were expecting. Shares of Ford Motor Co. rose 5.5 percent following the announcement.

Caterpillar, the world’s largest construction machinery maker, said it would buy mining equipment maker Bucyrus International Inc. for $7.6 billion in cash, a 32 percent premium over the company’s closing price on Friday. Shares of Caterpillar rose 1.9 percent.

Data storage company EMC Corp. also announced that it had reached a deal to buy competitor Isilon Systems Inc. for $2.2 billion in cash. It is offering $33.85 per share, a 29 percent premium over its closing price on Friday.

The push for mergers and acquisitions is a good sign for investors, said Uri Landesman, the president of Platinum Partners, a hedge fund in New York City. “It’s a statement that companies are moving out from under the bombshells of 2008 and 2009 and that they don’t think there will be another disaster,” he said.

Corporations are holding records amount of cash on their balance sheets. Using that cash to buy rivals or to expand into new areas could be a sign that companies are less concerned about the possibility that that economy will slide into another recession soon.

The Dow Jones industrial average rose 47.64, or 0.4 percent, to 11,240.22 in afternoon trading.

The broader Standard & Poor’s 500 index gained 3.62, or 0.3 percent, to 1,202.83, while the technology-focused Nasdaq composite index rose 5.67, or 0.2 percent, to 2,523.88.

Nine out of the 10 industry groups within the S&P 500 rose. Financial companies gained 1.2 percent to lead the index, while materials companies were the only group with a slight loss. Shares of Morgan Stanley gained 2.3 percent, while shares of JP Morgan Chase and Wells Fargo both rose 2 percent.

The shares of homebuilders tumbled. PulteGroup Inc. fell 4.4 percent, Toll Brothers Inc. fell 3.3 percent, and KB Home fell 2.4 percent.

Two-thirds of the 30 companies in the Dow Jones industrial average rose. Caterpillar’s gains made it the top performing stock in the index, while Walt Disney Co.’s 1.0 percent drop made it the laggard.

In corporate news, Lowe’s Companies Inc. reported a 19 percent rise in profit on tight cost controls. Its shares rose 0.5 percent. Urban Outfitters Inc. and Nordstrom Inc. will report earnings after the market close.

Akamai Technologies Inc. fell 4.9 percent following a ratings cut by analysts at Oppenheimer. The company, which helps companies speed the delivery of applications and video on Web pages, has seen its shares rise more than 80 percent so far this year to make it one of the best performing stocks in the S&P 500.

The dollar rose 0.5 percent against an index of other currencies. The euro was down 0.7 percent against the dollar at $1.3606 amid reports that Ireland was in talks with its European neighbors over how to deal with its financial troubles.

In addition to Ireland’s debt woes, investors were also worried about international pushback on the Federal Reserve’s plan to buy $600 billion in Treasury bonds, which U.S. trading partners say will further weaken the dollar, and a weak revenue forecast from network equipment maker Cisco Systems Inc.

Ireland’s finances are under strain after the government bailed out five banks after the country’s real estate boom collapsed. Investors are fearful that Ireland could become the next European country to require a bailout, as Greece did this past May. Irish officials say they aren’t applying a lifeline from Europe’s bailout fund.

Overseas markets also rose. The Euro Stoxx 50, which tracks blue chip companies in Europe, gained 0.8 percent. China’s Shanghai Composite Index closed 1.0 percent higher.

Prices for government bonds fell, sending yields higher. The 10-year Treasury yield rose to 2.8 percent.

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