NEW YORK - Stocks rebounded Monday after a fresh round of buyout news offered evidence that Wall Street's penchant for dealmaking hasn't disappeared.
Better-than-expected profit news from Merck & Co. also boosted the mood on Wall Street, helping it partially recover from a steep sell-off Friday that was triggered by some weak earnings reports and worries about souring subprime loans.
The stock market pushed those concerns aside Monday after Transocean Inc., the world's largest offshore drilling contractor, and rival GlobalSantaFe Corp. said they agreed to merge. The combined company will have a market value of about $53 billion.
In addition, equipment rental company United Rentals Inc. agreed to be taken private by affiliates of Cerberus Capital Management LP for about $4 billion in cash, while British bank Barclays PLC said it would raise its offer for ABN Amro Holding NV to $93.2 billion to fight a rival bid.
The turnaround from Friday's retrenchment demonstrates the market's resiliency, but also raises questions of whether the short-lived nature of most of this year's pullbacks means stocks are rising on a rickety foundation, said Ted Aronson, a partner at Aronson Johnson Ortiz in Philadelphia. Like many investors, he sees retreats as a healthful break for ascendent markets.
"We had a correction for a day. It's amazing. I think the market has gone too far, too fast. With that said, there is no doubt that the market is just amazingly strong," Aronson said.
The Dow Jones industrial average rose 92.34, or 0.67 percent, to 13,943.42, thanks in large part to a 6.75 percent rise in Merck's shares. At times during the session, the Dow was up more than 100 points.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 7.46, or 0.49 percent, to 1,541.56. The technology-heavy Nasdaq composite index showed more modest gains, rising 2.98, or 0.11 percent, to 2,690.58.
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.96 percent from 4.95 percent late Friday. Bond prices move opposite yields. The dollar was mixed against other major currencies after hitting a new record low against the euro and a new 26-year low against the British pound. Gold prices fell.
Light, sweet crude fell 90 cents to $74.89 per barrel on the New York Mercantile Exchange on suggestions that OPEC may increase its output.
The resumption of the market's climb comes on a day absent any major economic news and appeared to at least temporarily quiet some concerns that a souring of subprime loans, those made to borrowers with poor credit, will upend the market's advance. Uneasiness over bad loans and a resulting tightening of credit standards could stanch the huge flow of capital that has enabled much of the market-advancing buyout activity in recent years.
"All markets have risk. It's almost as if the market says there's no risk," Aronson said, citing his concerns about subprime loans. "Long-term I'm optimistic but it's one thing to be optimistic and it's another thing to believe in the tooth fairy."
But Wall Street applauded Monday's buyout news, because corporate tie-ups tend to signal that companies are bullish about the economy.
The Transocean/GlobalSantaFe combination also reflects strong demand as energy companies can afford to spend more on difficult-to-extract supplies. Oil prices touched nearly one-year highs last week. Under the terms of the deal, Transocean shareholders will receive $33.03 and 0.6996 shares of the combined company for each share of Transocean they own, and shareholders of GlobalSantaFe will receive $22.46 and 0.4757 shares of the company for each share of GlobalSantaFe they own.
Transocean rose $5.99, or 5.5 percent, to $115.96, while GlobalSantaFe rose $3.59, or 4.8 percent, to $78.33.
The United Rentals deal, for $34.50 per share, represents a 7 percent premium over United's closing price Friday. It is also a 25 percent premium to the stock's closing price of $27.55 on April 10, the day the company said it was exploring strategic options. In Monday's trading, United Rentals rose 61 cents to $32.98.
While the merger news helped convince Wall Street that stocks have further room to run even after hitting fresh highs last week, earnings news again commanded some attention.
Merck reported a 12 percent increase in its second-quarter earnings. Merck, the best performer Monday among the 30 stocks that comprise the Dow, rose $3.31 to $52.33.
American Express Co., which like Merck is a Dow component, reported a stronger-than-expected second-quarter profit. The credit card issuer ended the regular session up 15 cents at $64.66 but slipped in after-hours trading as revenue fell short of Wall Street's forecast.
On Friday, lackluster profit reports from Caterpillar Inc. and Google Inc. raised concerns about the overall strength of corporate earnings, and were in part responsible for a nearly 150-point drop in the Dow.
The drop capped a losing week for the Dow after three weeks of gains. Last Thursday, the Dow managed to finish above 14,000 for the first time and the Standard & Poor's 500 index also logged a record close.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where consolidated volume came to 3.09 billion shares, down from 3.65 billion on Friday.
The Russell 2000 index of smaller companies fell 0.82, or 0.10 percent, to 835.62.
Overseas, Japan's Nikkei stock average rose 0.01 percent, while Hong Kong's Heng Seng Index rose 0.32 percent and the often-volatile Shanghai Composite Index rose 3.81 percent. Britain's FTSE 100 rose 0.60 percent, Germany's DAX index rose 0.88 percent, and France's CAC-40 advanced 0.87 percent.