updated 7/12/2005 8:11:15 AM ET 2005-07-12T12:11:15

Stocks extended Friday’s advance Monday on news of dropping oil prices and a bevy of corporate mergers.

Major Market Indices

Oil prices fell for the third straight day , dropping more than $1 a barrel after Hurricane Dennis missed key Gulf of Mexico refineries, avoiding a disruption in fuel supplies. Wall Street has been nervously watching oil prices, worried that further increases would curb consumer spending and chip away at corporate profits.

Crude prices climbed last week on fears of a repeat of last year’s Hurricane Ivan, which damaged oil platforms and caused months of lost production in the Gulf. But on Monday light sweet crude for August delivery fell below $59 a barrel on New York Mercantile Exchange.

The Dow Jones industrial average finished the day up 70.58 points, or 0.7 percent, while the broader Standard & Poor’s 500-stock index added 7.58 points, or 0.6 percent. The Nasdaq composite index, laden with technology stocks, rose 22.55 points, or 1.1 percent.

News of corporate deals in telecom, banking and pharmaceuticals boosted stocks, too, stoking investors’ hopes that second-quarter earnings might be stronger than expected. Investors welcomed the deals as a sign that companies feel secure enough to spend some of the cash they accumulated during the earnings run-up of the past two years. Standard & Poor’s 500 companies, for instance, have the largest cash reserve in the S&P’s history.

While stocks were higher Monday, they stayed within the narrow trading range of the last year-and-a-half. “The market is just kind of waiting,” said Bob Baur, managing director and head of global trading at Principal Global Investors. “They’re waiting for the Fed to stop raising rates, they’re waiting for earnings to slow, they’re waiting for oil to stop rising.”

A mixed job creation report for June had enough good news in it to push Wall Street sharply higher Friday, lifting the Dow Jones industrials 147 points, or 1.4 percent. European stock markets also rallied Friday , one day after a series of deadly terrorist bombings in London slammed the region’s stock markets and dented U.S. stocks.

Monday’s deals included a report that Goldman Sachs Group Inc. and German financial firm Allianz are in talks to buy a $1 billion-plus stake in one of China’s largest state-owned commercial banks . Drug distributor McKesson Corp. said it would buy a smaller regional distributor and Dutch media company VNU NV said it would buy U.S.-based health care data provider IMS Health Inc. in a cash and stock deal valued at more than $6 billion.

While the merger activity lifted the market’s mood, investors are also buying for fundamental reasons, said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. “People are underinvested and interest rates are relatively low,” he said.

The talks involving Goldman Sachs, Allianz and the Commercial Bank of China are at an early stage, according to a report on The Asian Wall Street Journal’s Web site, which cited unidentified sources. Goldman Sachs rose $1.66 to $107.31. Allianz rose 21 cents to $11.99.

Most other companies involved in deals gained as well. IMS rose 61 cents to $26.50. McKesson rose 66 cents to $45.21 and the regional distributor it is buying, D&K Healthcare Resources rose $5.80 to $14.30.

But Sprint Corp. fell 7 cents to $25.45 after it said it would acquire U.S. Unwired Inc. for $1.3 billion . U.S. Unwired, which provides Sprint PCS cellular services in nine states, is valued at $6.25 per share in the agreement. U.S. Unwired rose 4 cents to $6.20.

Procter & Gamble Co. shares rose 94 cents to $53.90, lifted by a brokerage note from Prudential Equity Group predicting its stock price will rise once it completes its acquisition of razor blade maker Gillette Co. DuPont Co. shares rose 65 cents to $44.15 after Deutsche Bank upgraded its stock.

Shares in Merck & Co. rose 24 cents to $31.24 as jury selection began in Texas for the first trial alleging the drug maker knew of the dangers posed by its popular painkiller Vioxx long before it voluntarily pulled the drug from the market last year. “We intend to defend these cases individually over many years,” Merck’s general counsel, Kenneth C. Frazier, said in a statement. The company’s most recent lawsuit count reached 3,857.

DreamWorks Animation SKG Inc., creator of animated hits “Shrek” and “Shark Tale,” warned of a loss in the second quarter , cut its full-year forecast and said the Securities and Exchange Commission is investigating its stock trading and the release of its first-quarter results. Its stock dropped $3.54 to $23.27.

Morgan Stanley rose 45 cents to $53.57 after it announced Co-President Stephen S. Crawford resigned from the financial services firm, while Co-President Zoe Cruz was appointed acting president.

Overseas, Japanese stocks rose to a 13-week high Monday as major exporters like Honda Motor Co. benefited from Wall Street’s gains Friday. Japan’s Nikkei stock average rose 108.80 points, or 0.9 percent. Britain’s FTSE 100 rose 0.2 percent, Germany’s DAX index rose 1.4 percent and France’s CAC-40 was up 0.5 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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