Merger Mania: Deal Making Ignites Rally on Wall St.

FOX Business: The Power to Prosper

A round of high-profile deal making launched the blue chips into the green for the third-straight day for the first time in six weeks, and erased last week's losses.

Today's Markets

The Dow Jones Industrial Average rose 214 points, or 1.9%, to 11,483, the S&P 500 climbed 25.7 points, or 2.2%, to 1,204 and the Nasdaq Composite gained 47.2 points, or 1.9%, to 2,555. The FOX 50 jumped 17.8 points to 866.

After one of the most tumultuous weeks in Wall Street's history, in which the Dow made 400 points moves every day but Friday, the blue chips lost a relatively modest 1.5%.  However, the Dow, S&P and Nasdaq have now completely reversed the losses. In fact, the blue chips have now surged 7.1% in three days -- the best percentage performance since March 2009.

Concerns over the U.S credit downgrade and Europe's financial sector faded to the background by the end of the week, with mergers and acquisitions activity taking center-stage this week.

Google (NASDAQ:GOOG) unveiled plans to acquire Motorola Mobility (NYSE:MMI) for $12.5 billion, or $40 a share.  The search giant, which previously only made software to support mobile devices, is now squarely positioned to tap into the hardware and software business.  Apple (NASDAQ:AAPL), one of Google's key competitors, controls both the software and hardware of its super-popular iPhones.

The move gave other mobile-phone companies, such as Nokia (NYSE:NOK) and Research in Motion (NASDAQ:RIMM) a boost on hopes other buyouts may ensue as big players like Microsoft (NASDAQ:MSFT) look to bolster their foothold in the burgeoning industry.

Bank of America (NYSE:BAC) revealed it is selling its $8.6 billion Canadian credit card portfolio to TD Bank Group as it looks to focus on building back its domestic banking business and acquiring capital.

Time Warner Cable (NYSE:TWC) also announced plans to buy Insight Communications for roughly $3 billion in cash, a sweeter offer than rivals such as Cablevision (NYSE:CVC) have made.

Major mergers and acquisitions activity is a boon to confidence for markets overall, showing a sharp contrast from the often glum sentiment on Wall Street last week.

The financial sector, which was badly beaten down last week, was one of the best performing industry groups on Monday.  Big banking institutions like Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) posted hefty gains.

Energy companies like ExxonMobil (NYSE:XOM) and Halliburton (NYSE:HAL) also performed extremely well on the day, tracking big gains in the commodities complex.

On the economic front, manufacturing in the New York region contracted  in the beginning of August.  The New York Federal Reserve's gauge fell to -7.7 from -3.8 -- worse than economists forecasts of 0. Reading above 0 point to expansion, while those below point to contraction.

Homebuilder sentiment held steady in August, according to the National Association of Homebuilders, which was in line with analysts' estimates. The home construction industry was hit hard during the economic downturn, and is still facing many headwinds.

Builders "have to battle a sluggish labor market, tight lending standards and a shift towards renting," Peter Boockvar, managing director at Miller Tabak+Co., wrote in a research note.

Japan's economic output contracted at an annualized pace of 1.3%, a far shallower retreat than the 2.7% economists estimated. The Asian country's economy is the third largest in the world, making its impact on the global economic picture substantial.

Energy futures soared on the day.  Light, sweet crude jumped $2.50, or 2.9%, to $87.88 a barrel.  Wholesale RBOB gasoline gained 5 cents, or 1.9%, to $2.87 a gallon.

Gasoline prices on the consumer level moderated over the past week.  A gallon of regular costs $3.59 on average, down from $3.67 last month, but well higher than the $2.76 drivers paid last year.

Gold, which leaped to several record closes last week amid the market uncertainty, jumped $15.40, or 0.88%, to $1,758 a troy ounce.

The euro soared 1.1% against the U.S. dollar and the greenback slumped 1% against a basket of world currencies.

Foreign Markets

The English FTSE 100 gained 0.57% to 5,351, the French CAC 40 climbed 0.78% to 3,239 and the German DAX jumped 0.41% to 6,022.

In Asia, the Japanese Nikkei 225 jumped 1.4% to 9,086 and the Chinese Hang Seng soared 3.3% to 20,260.