Banking, other deals drive stock indexes higher

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NEW YORK — Financial companies led the stock market higher Tuesday after another big banking deal raised hopes that more acquisitions could be on the way.

Toronto-Dominion Bank is buying Chrysler Financial, the automaker’s old lending arm, from Cerberus Capital Management LP for $6.3 billion. It was the latest example of a relatively healthy Canadian bank buying a U.S. lender battered by the financial crisis. Toronto-Dominion bought Commerce Bancorp Inc. in 2008, and just four days ago Bank of Montreal said it would buy Milwaukee-based bank Marshall & Ilsley Corp. for $4.1 billion.

Corporate mergers have picked up strongly this year. That, along with signs of an improving economy and a tax cut package passed last week, have helped drive stocks up. The Standard & Poor’s 500 index has jumped 6.2 percent this month and is up 12.5 percent this year.

Investors like to see an increase in deals because it shows that companies are becoming more confident in the economy. It also leads investors to hunt for companies that might become targets for buyers.

Research firm Dealogic reported Tuesday that the total dollar amount of corporate deals has jumped 18 percent to $2.7 trillion so far this year compared with all of 2009. Caterpillar Inc., Chevron Corp. and Google Inc. have also made significant deals in 2010.

“There is growing optimism about the economy, or at least the U.S. economy, in 2011,” said Alan Gayle, senior investment strategist for RidgeWorth Investments. “We’re 18 months into this recovery, and good things are gradually happening.”

The Dow Jones industrial average rose 49.39, or 0.4 percent, to 11,527.52 in afternoon trading. The Dow is up 4.7 percent so far this month.

The Standard & Poor’s 500 index rose 6.9, or 0.6 percent, to 1,254.04. The Nasdaq composite index rose 16.92, or 0.6 percent, to 2,666.48.

Financial companies were the best performers. JPMorgan Chase & Co. rose the most among the 30 companies that make up the Dow. The stock rose 2.5 percent to $40.93. Bank of America Corp., Goldman Sachs Group Inc. and Wells Fargo Corp. all rose by more than 1 percent.

“There’s a perception that some of the … bigger banks will start an acquisition program of their own in addition to what we’re seeing with some of the Canadian banks,” said Randy Bateman, chief investment officer for Huntington Asset Advisors.

Adobe Systems Inc. jumped 4.9 percent to $30.60 after the software maker reported earnings that were much stronger than analysts had expected. The company also raised its forecast for earnings and revenue in the current quarter.

Another technology company, Jabil Circuit Inc., soared 10.6 percent to $19.54 after its income more than tripled on stronger revenue. Jabil, which makes parts for electronics and other technology companies, also issued a higher earnings and revenue forecast.

CarMax Inc. slumped 7.3 percent to $33.28. The used car dealership chain said its expenses jumped 14 percent last quarter as the company paid more for sales commissions and advertising.

Nike Inc. reports results after the stock market closes.

Bond prices were relatively flat. The yield on the 10-year Treasury note edged down to 3.32 percent from 3.35 percent late Monday.

The euro fell after Portugal became the latest European country to be warned of a possible credit rating downgrade.

Asian markets rose as tensions eased between North and South Korea. Japan’s Nikkei 225 stock average closed up 1.5 percent, South Korea’s Kospi rose 0.8 percent and Hong Kong’s Hang Seng index rose 1.6 percent.