Dow jumps almost 100 on takeover talk

Wall Street stocks jumped Tuesday, as a report that two companies want to buy aluminum producer Alcoa Inc. stoked investors' hopes that takeover activity is on the rise. In midafternoon trading, the Dow rose 85.80, or 0.68 percent, to 12,638.35, after rising by more than 100 points in earlier trading.

Broader stock indicators were also higher. The Standard & Poor's 500 index rose 9.41, or 0.66 percent, to 1,442.78, and the Nasdaq composite index rose 6.75, or 0.28 percent, to 2,457.13.

Australia-based mining companies BHP Billiton Ltd. and Rio Tinto PLC are each considering offering to buy Pittsburgh-based Alcoa for $40 billion, according to the Times of London.

The report comes amid Hindalco Industries Ltd.'s $3.6 billion offer to buy Canadian aluminum maker Novelis Inc., and drugstore operator CVS Corp. bumping up the value of its proposed buy of Caremark Rx Inc. _ signaling that the global economy has some muscle.

Market watchers warned, though, that Tuesday's climb follows three straight days of drops in the Dow Jones industrials, recent earnings reports have been mixed, and trading has been volatile leading up to Federal Reserve Chairman Ben Bernanke's speech before Congress Wednesday. It's possible Bernanke will hint that the Fed might raise interest rates, a move that could hurt consumer spending.

"The optimists are lifting their heads today despite all the pessimism in the market right now," said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. "They're making the bet that his comments will be benign, rather than scary and hawkish."

The equity markets Tuesday were also boosted by a spike in oil prices; an analyst upgrade of General Motors Corp.; a stock buyback from 3M; and strong earnings reports from Marsh & McLennan Companies Inc. and Nasdaq Stock Market Inc.

Bonds slipped ahead of Bernanke's speech, despite the Commerce Department report showing that the trade deficit grew more than analysts expected in December to $61.2 billion, pushing the gap to its fifth consecutive annual record in 2006. The yield on the benchmark 10-year Treasury note was at 4.82 percent Tuesday, up from 4.81 percent late Monday.

The dollar was mixed against other major currencies. Gold prices edged higher.

Oil prices rose $1.58 to $59.39 a barrel on Tuesday after the International Energy Agency predicted a sharp rise in global demand in 2007.

The climb in energy prices encouraged traders to buy oil company stocks. Exxon Mobil Corp. rose 70 cents to $75.30; Chevron Corp. rose 41 cents to $72.73; and ConocoPhillips rose $1.01 to $67.04

The metals and mining sector was boosted by the report on possible bids for Alcoa. Alcoa rose $1.93, or 5.8 percent, to $34.83, while rival Alcan Inc. rose $2.42, or 4.6 percent, to $54.61.

In other signs that merger-and-acquisition activity is strong, restaurant chain Applebee's International Inc. said it is looking into a possible sale of the company, while CVS boosted the value of its proposed acquisition of Caremark.

Applebee's rose $2.47, or 10.19 percent, to $26.70.

Caremark, which is also being pursued by Express Scripts Inc., rose $2.07, or 3.4 percent, to $62.98.

Most major earnings reports on Tuesday came in strong. But Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., pointed out that overall, quarter-on-quarter corporate financial results have been cooling off from last year's high double-digit growth _ notably in the banking and oil industries, which were big drivers in previous quarters.

This moderation, along with the potential for Bernanke's comments to rock the markets on Wednesday, led many market watchers to interpret Tuesday's jump fairly conservatively.

The report on Alcoa "has given the market some short-term fervor, but I don't think it's sustainable," Battipaglia said. "Today's action is very nice, but it's a very narrow set of circumstances."

Nasdaq Stock Market Inc., the world's largest electronic equities exchange, said its fourth-quarter profit tripled, thanks in part to robust trading volumes. Its shares fell $3.60, or 10.3 percent, to $31.50, though, on the collapse of its bid for the London Stock Exchange Monday.

Marsh & McLennan Companies Inc., the nation's largest insurance brokerage, reported that profit in the latest quarter grew six-fold on strong revenue growth in its insurance, risk and consulting businesses. Marsh slipped 26 cents to $29.57, however.

KB Home said it swung to a loss in the latest quarter, but the results were better than analysts expected. KB Home rose $1.65, or 3.2 percent, to $53.59.

The auto sector was lifted by a Merrill Lynch analyst report that upgraded GM but downgraded Ford Motor Co. GM rose 92 cents, or 2.6 percent, to $36.63, and DaimlerChrysler rose 46 cents, or 2.6 percent, to $18.02. Ford fell 22 cents, or 2.4 percent, to $8.43.

3M, the maker of Post-it Notes and Scotch tape, rose $1.99, or 2.7 percent, to $76.58 after authorizing a new $7 billion two-year share repurchase program.

Advancers outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 927.25 million shares.

The Russell 2000 index of smaller companies rose 5.12, or 0.64 percent, to 810.91.

Overseas, Japan's Nikkei stock average rose 0.67 percent, hitting its highest level in more than six years.

Britain's FTSE 100 gained 0.32 percent, Germany's DAX index rose 0.52 percent, and France's CAC-40 increased 0.69 percent.

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