Stocks rise as investors see a pickup in takeover activity as a promising sign for the economy

Stocks gain on takeover news, rising commodities

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

Stocks are higher for the third day Tuesday following gains among materials and energy shares. A takeover bid from Kraft Foods Inc. for Cadbury is reviving hopes that the economy could be improving.

According to preliminary calculations, the Dow Jones industrial average is up 56 at 9,497. The Standard & Poor’s 500 index is up 9 at 1,025. The Nasdaq composite index is up 19 at 2,038.

Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to a relatively low 1.3 billion shares.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

NEW YORK (AP) — News about corporate takeovers is making investors more optimistic about the economy and giving them new reasons to buy stocks.

Stocks rose Tuesday as investors were encouraged by takeover news from overseas. Rising prices for oil, gold and other commodities pushed energy and materials stocks higher.

Deutsche Telekom and France Telecom 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 rejected a takeover bid from Kraft Foods Inc., reviving interest in making acquisitions is being seen as a welcome sign for the economy.

The increase in corporate takeover activity suggests an improvement in businesses’ confidence and reinforces views that the worst of the global economic downturn could be over. However, many investors still fear that any recovery would be held back by rising unemployment and the pressure that would put on household spending.

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

George F. Shipp, chief investment officer at Scott & Stringfellow in Virginia Beach, Va., said U.S. markets are advancing in part to catch up with overseas trading after the Labor Day holiday in the U.S. He also said that the takeover talk about Cadbury underscores that there are some companies faring better than others in the recession.

“Some companies are doing reasonably well,” he said. “Chocolate is less susceptible to whatever is going to happen in mortgages and banking and unemployment.”

In late afternoon trading, the Dow Jones industrial average rose 39.67, or 0.4 percent, to 9,480.94. The broader Standard & Poor’s 500 index rose 7.07, or 0.7 percent, to 1,023.47, and the Nasdaq composite index rose 12.00, or 0.6 percent, to 2,030.78.

Bond prices rose, pushing yields lower. The yield on the 10-year Treasury note fell to 3.44 percent from 3.45 percent late Friday.

Among stocks moving on takeover talk, Cadbury jumped $14.15, or 37.8 percent, to $51.61. Kraft fell $1.62, or 5.8 percent, to $26.48.

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

Crude oil rose $3.34 to $71.36 a barrel on the New York Mercantile Exchange.

Tom Phillips, president of TS Phillips Investments in Oklahoma City, said investors are buying gold 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.

Freeport-McMoRan Copper & Gold Inc. rose $2.04, or 3.1 percent, to $68.04, while oilfield services company Schlumberger Ltd. rose $2.15, or 3.9 percent, to $58.02.

Meanwhile, General Electric Co. led the 30 stocks that make up the Dow industrials, rising 64 cents, or 4.6 percent, $14.51, 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.

The Russell 2000 index of smaller companies rose 3.73, or 0.7 percent, to 574.23.

Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 841.8 million shares compared with 668.8 million shares traded at the same point 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 rose 0.7 percent.