NEW YORK - Wall Street stocks jumped Tuesday, pushing up the Dow Jones industrials by more than 100 points as a report that two companies are trying to buy Alcoa Inc. stoked investors' hopes for a pickup in takeover activity.
Australia-based mining companies BHP Billiton Ltd. and Rio Tinto PLC are each planning to offer $40 billion for the aluminum producer, according to the Times of London.
The report came amid Hindalco Industries Ltd.'s $3.6 billion offer to buy Canadian aluminum maker Novelis Inc., and drugstore operator CVS Corp.'s bumping up the value of its proposed purchase of Caremark Rx Inc.
The flurry of takeover-related news suggested that the global economy has some muscle. Investors were also encouraged by rebounding oil prices, an upgrade of General Motors Corp., and a stock buyback by 3M.
Analysts cautioned, though, that Tuesday's rally followed three straight days of drops in the Dow, and that recent earnings reports have been mixed. Futhermore, Federal Reserve Chairman Ben Bernanke could hint in his testimony to Congress Wednesday, as many Fed officials did last week, that rising inflation might compel policy makers to hike 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."
According to preliminary calculations, the Dow climbed 102.30, or 0.81 percent, to 12,654.85.
Broader stock indicators also rose. The Standard & Poor's 500 index increased 10.89, or 0.76 percent, to 1,444.26, and the Nasdaq composite index rose 9.50, or 0.39 percent, to 2,459.88.
Bonds were little changed, despite the Commerce Department's report that the trade deficit grew more than expected in December, pushing the gap to its fifth consecutive annual record in 2006. The yield on the benchmark 10-year Treasury note was at 4.81 percent Tuesday, the same as late Monday.
The dollar was mixed against other major currencies. Gold prices edged higher.
Oil prices rose $1.29 to settle at $59.06 a barrel on Tuesday after the International Energy Agency predicted a sharp rise in global demand in 2007.
The climb in energy prices led traders to buy oil company stocks. Exxon Mobil Corp. rose 85 cents to $75.45; Chevron Corp. rose 51 cents to $72.83; and ConocoPhillips rose $1.24 to $67.27.
Meanwhile, the metals and mining sector was boosted by the report on Alcoa. Alcoa rose $2.09, or 6.4 percent, to $34.99, while rival Alcan Inc. rose $2.58, or 4.9 percent, to $54.77.
In other signs that merger-and-acquisition activity is quickening, 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 $2.09, or 8.6 percent, to $26.32.
Caremark, which is also being pursued by Express Scripts Inc., rose $1.92, or 3.2 percent, to $62.83.
Most major earnings reports on Tuesday came in strong. But Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., pointed out that overall, corporate financial results have been cooling off since last year's high double-digit growth - notably in banks and oil companies, which were big drivers in previous quarters.
This moderation, along with the potential for Bernanke's comments to rock the markets on Wednesday, led some market watchers to interpret Tuesday's jump 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."
Despite the recent volatility in stocks, most analysts say the market is still in an overall uptrend.
"The fundamental picture is better than it looked in mid-December. There's a bit of a slowdown in the economy, but above-average earnings," said RBC Dain Rauscher's Dow.
Nasdaq Stock Market Inc., the world's largest electronic equities exchange, said its fourth-quarter profit tripled, thanks partly to robust trading volumes. Its shares plummeted $4, or 11.4 percent, to $31.10, though, on the collapse Monday of its bid for the London Stock Exchange.
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 49 cents to $29.34, however.
KB Home said it swung to a loss in the latest quarter, but the homebuilder's results were better than analysts expected. KB Home rose $1.36, or 2.6 percent, to $53.30.
The auto sector was lifted by a Merrill Lynch analyst report that upgraded General Motors but downgraded Ford Motor Co. GM rose 89 cents to $36.60, after hitting a new 52-week high. DaimlerChrysler rose 82 cents to $64.48. Ford fell 21 cents, or 2.4 percent, to $8.44.
3M, the maker of Post-it Notes and Scotch tape, rose $1.71, or 2.3 percent, to $76.30 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 1.32 billion shares.
The Russell 2000 index of smaller companies rose 6.74, or 0.84 percent, to 812.53.
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.