Another wave of corporate dealmaking stoked investors' confidence in the economy and carried stocks sharply higher Monday.
Analyst upgrades of Alcoa Inc. and Intel Corp. and positive momentum on President Obama's health care overhaul also helped drive a broad advance on the stock market. Major indexes closed off their highs of the day but still rose about 1 percent. The Dow Jones industrial average jumped into the black for the month.
Bond prices tumbled as stocks rose, pushing the yield on the benchmark 10-year Treasury note up to its highest level since August. The dollar strengthened, hurting commodities prices.
Stocks got an early boost Monday after French drug maker Sanofi-Aventis SA announced plans to buy U.S. health care products company Chattem Inc. for $1.9 billion, while mining equipment maker Bucyrus International Inc. said it planned to buy Terex Corp.'s mining equipment division for $1.3 billion. Dutch automaker Spyker Cars submitted a new offer to buy Saab from General Motors Co.
Robert Pavlik, chief market strategist at Banyan Partners, said the flurry of corporate deal activity is an encouraging sign of strength in the economy.
"Companies are revealing that they are in a better position financially," he said. "If they weren't feeling as confident, you wouldn't see this type of activity occurring."
The deals announced Monday follow Exxon Mobil Corp.'s $29 billion takeover of XTO Energy Inc. last week.
In other corporate news, aluminum maker Alcoa Inc. announced an $11 billion joint venture in Saudi Arabia. The deal, along with an analyst's upgrade of the stock, drove Alcoa shares up nearly 8 percent, making it the best performer among the 30 stocks that make up the Dow.
An upgrade of chip maker Intel Corp. helped boost technology stocks, while health care stocks rose broadly as a historic health bill moved closer to passage in the Senate.
Investors have been putting the brakes on stock buying since November, stepping back from the market following a historic rally over the past nine months. At the same time, prospects of an interest rate hike and a potential rebound in the dollar have dogged investors who spent the year taking advantage of low rates to borrow cheaply and invest in stocks and commodities.
The Dow rose 85.25, or 0.8 percent, to 10,414.14, after rising as much as 129 points earlier in the day. The Standard & Poor's 500 index rose 11.58, or 1.1 percent, to 1,114.05, while the Nasdaq composite index rose 25.97, or 1.2 percent, at 2,237.66.
Bond prices sank as investors abandoned the safety of government debt in favor of stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, climbed to 3.68 percent from 3.54 percent late Friday.
The dollar rose against other major currencies, making commodities more expensive for foreign buyers. Light, sweet crude for February delivery fell 70 cents to settle at $73.72 a barrel on the New York Mercantile Exchange. Gold also fell.
Monday's surge in stocks lifted the Dow into positive territory for the month, giving it a 0.7 percent gain. Many analysts believe stocks should finish out the year strong after several weeks of listless trading.
Historically, December is the best single month for stocks, with the S&P 500 index averaging a 1.6 percent gain. So long as economic and corporate news continues to be encouraging, analysts expect the market to keep its momentum going into the new year.
Among the standout stocks, Chattem surged more than 33 percent, adding $23.16 to $93.14 after Sanofi-Aventis offered $93.50 a share for the company. Chattem, which is traded on the Nasdaq, helped lift that index to an intraday high for the year.
Alcoa shares shot up 7.9 percent after the announcement of the Saudi deal and Morgan Stanley's upgrade of the stock based on a forecast of higher aluminum prices. Shares jumped $1.15 to $15.73, after earlier hitting a 14-month high of $15.98.
About three stocks rose for every one that fell on the New York Stock Exchange, where volume was 4.0 billion shares compared with 7.7 billion shares on Friday.
Volume was exceptionally high Friday as several types of options contracts expired and S&P made changes to the S&P 500. That index is the basis for many indexed mutual funds, so those funds were forced to alter their holdings to match the reconstituted index.
In other trading, the Russell 2000 index of smaller companies rose 8.03, or 1.3 percent, to 618.60.
Overseas, Japan's Nikkei stock average rose 0.4 percent. Britain's FTSE 100 rose 1.9 percent, Germany's DAX index gained 1.7 percent, and France's CAC-40 jumped 2.1 percent.