Caterpillar, Europe hopes fuel Wall Street gains
By Chuck Mikolajczak
Equities have risen on hopes a resolution to Europe's sovereign debt crisis is on the horizon and a reduced likelihood of a U.S. recession after stronger-than-expected corporate results and economic data.
Adding to the positive tone was a batch of M&A activity in the health care and technology sectors involving deals totaling more than $5 billion.
Caterpillar Inc <CAT.N> jumped 5 percent to $91.77 to lead the Dow higher after the world's largest heavy equipment maker reported a 44 percent jump in quarterly profit on record revenues.
"The market is completely convinced at the moment that Europe is going to be successful with a plan that the market is going to like -- that they think is credible -- clearly," said Ken Polcari, managing director at ICAP Equities in New York.
"The other thing is this week is a big, big week in terms of mining names, energy names, industrial names . We've gotten some good forecasts going forward, so as long as all that holds, that is what is fueling this fire."
Companies due to report on Tuesday include DuPont <DD.N>, 3M Co <MMM.N> and United States Steel <X.N>.
The Dow Jones industrial average <.DJI> advanced 104.83 points, or 0.89 percent, to 11,913.62. The Standard & Poor's 500 Index <.SPX><.INX> rose 15.95 points, or 1.29 percent, to 1,254.20. The Nasdaq Composite Index <.IXIC> gained 61.98 points, or 2.35 percent, to 2,699.44.
The gains on Monday put the S&P 500 up nearly 11 percent for the month, putting the benchmark index on track for its best monthly performance since December 1991.
According to Thomson Reuters data, of the 142 companies in the S&P 500 that have reported quarterly earnings through Monday, 68 percent have topped Wall Street estimates.
Even though earnings fueled gains, solving Europe's debt crisis will be crucial to further gains. Light volume suggested investors would remain cautious until the details of the euro zone plan were known.
"We remain within that trading range and this week is going to be chock full of these earnings. Like Caterpillar today was a very strong number, so if we continue to get that this week, don't be surprised to see the market go there," said Polcari.
Oracle Corp <ORCL.O> said it would acquire RightNow Technologies Inc <RNOW.O>, which provides cloud-based customer services software, for about $1.5 billion, or $43 per share. RightNow surged 19.4 percent to $42.94 while Oracle added 2.3 percent to $32.87.
Cigna Corp <CI.N> will acquire HealthSpring Inc <HS.N>, a Medicare health provider, for $3.8 billion, or $55 a share. Cigna edged up 1.4 percent to $45.34 and HealthSpring jumped 33.7 percent to $53.71. The Morgan Stanley healthcare payor index <.HMO> climbed 4.7 percent.
European policymakers deferred a final decision on a strategy to end a sovereign debt crisis as they neared agreement on bank recapitalization and on how to leverage a rescue fund to try to stop bond market contagion. The leaders were due to meet again Wednesday.
Volume was on the light side, with about 7.63 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, slightly below the daily average of 8.01 billion.
Advancing stocks outnumbered declining ones on the NYSE by 2.489 to 528, while on the Nasdaq, advancers beat decliners 2,080 to 474.
(Editing by Kenneth Barry)