Stocks climb as traders see gains in commodities, rise in takeover activity as promising signs

Stocks gain on rising commodities, takeover news

NEW YORK — Rising commodities prices and stirrings of corporate takeovers are making investors more optimistic about the economy.

Stocks rose for the third straight day Tuesday as gold topped $1,000 an ounce for the first time since February and oil jumped more than $3 a barrel. The rising prices helped lift material and energy stocks. The gains in commodities came as the dollar fell and investors looked for more ways to profit from an improving economy.

“The commodities stocks were driving it today,” said Joe Saluzzi, co-head of equity trading at Themis Trading LLC.

Talk of a revival in corporate dealmaking also boosted the mood on Wall Street. A takeover bid from Kraft Foods Inc. for rival Cadbury PLC — even though Cadbury rejected it — combined with a big phone deal in England lifted hopes that takeover activity could be picking up. Deutsche Telekom and France Telecom said they planned to combine their British mobile phone units to form that country’s biggest mobile operator.

A weekend pledge by the world’s 20 biggest economies to support the global recovery with stimulus efforts also helped keep the market’s tone positive.

George F. Shipp, chief investment officer at Scott & Stringfellow in Virginia Beach, Va., said the takeover talk surrounding Cadbury underscores the fact that some companies are faring better than others.

“Chocolate is less susceptible to whatever is going to happen in mortgages and banking and unemployment,” Shipp said.

The Dow Jones industrial average rose 56.07, or 0.6 percent, to 9,497.34. The index is up 217 points, or 2.3 percent, over three days.

The broader Standard & Poor’s 500 index rose 8.99, or 0.9 percent, to 1,025.39, and the Nasdaq composite index rose 18.99, or 0.9 percent, to 2,037.77.

The Russell 2000 index of smaller companies rose 5.88, or 1 percent, to 576.38.

Bond prices fell, pushing yields higher. The yield on the 10-year Treasury note rose to 3.48 percent from 3.45 percent late Friday.

The dollar fell against other major currencies and gold — which is often bought as a safe haven asset — topped $1,000 an ounce before settling just short of that mark.

Crude oil rose $3.08 to settle at $71.10 a barrel on the New York Mercantile Exchange.

Tom Phillips, president of TS Phillips Investments in Oklahoma City, said investors are buying gold as they buy stocks because they are nervous about the economy and rising deficits but don’t want to miss more gains in the stock market. The S&P 500 index has jumped 50 percent from a 12-year low in early March.

“It is a flight to safety. It’s kind of like everyone is hedging their bets. They want to be in the market because they don’t want to miss out, but they’re spooked,” he said.

The gains in gold came as other commodities rose.

Freeport-McMoRan Copper & Gold Inc. rose $2, or 3 percent, to $68, while aluminum producer Alcoa Inc. rose 42 cents, or 3.5 percent, to $12.60. Oilfield services company Schlumberger Ltd. rose $2.23, or 4 percent, to $58.10.

Meanwhile, General Electric Co. led the 30 stocks that make up the Dow industrials, rising 63 cents, or 4.5 percent, $14.50, after J.P. Morgan upgraded the company’s shares saying that the market had already priced in most problems with the conglomerate’s lending arm.

Among stocks moving on takeover talk, Cadbury jumped $14.42, or 38.5 percent, to $51.88. Kraft fell $1.65, or 5.9 percent, to $26.45.

Three stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 5.4 billion shares compared with 4.1 billion traded Friday.

Britain’s FTSE 100 and Germany’s DAX index rose 0.3 percent, while France’s CAC-40 advanced 0.2 percent. Japan’s Nikkei stock average gained 0.7 percent.