Stocks rise as investors look to merger discussions as promising sign for economic recovery

Stocks rise as merger news boosts investors’ mood

NEW YORK — News about mergers is making investors more optimistic about the economy and giving them new reasons to buy stocks.

Stocks rose early Tuesday as investors were encouraged by news from overseas. Deutsche Telekom AG and France Telecom SA said they plan to combine their British mobile phone units — T-Mobile UK and Orange UK — to form that country’s biggest mobile operator.

And while Cadbury PLC rejected a takeover bid from Kraft Foods Inc., companies’ reviving interest in making acquisitions is being seen as a welcome sign for the economy.

A weekend pledge by the world’s 20 biggest economies to support the global recovery with stimulus efforts is contributing to the a positive tone in the markets.

The increase in corporate activity suggests an improvement in businesses’ confidence and reinforces views that the worst of the global economic downturn could be over.

Still, many investors doubt that a strong recovery can be sustained over coming months, as unemployment continues to rise, putting pressure on households’ spending.

In early trading, the Dow Jones industrial average rose 39.22, or 0.4 percent, to 9,480.49. The broader Standard & Poor’s 500 index rose 6.42, or 0.6 percent, to 1,022.82, and the Nasdaq composite index rose 10.48, or 0.5 percent, to 2,029.26.

Bond prices mostly fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.47 percent from 3.45 percent late Friday. Markets were closed Monday for Labor Day.

The dollar fell against other major currencies, while gold — which is typically bought as a safe haven asset — rose above $1,000 an ounce.