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Merger news, data boost Wall Street

Stocks rallied Tuesday, with the Dow Jones industrial average recording an 87-point gain, as investors started a holiday-shortened trading week on an optimistic note, applauding news of more corporate mergers and upbeat U.S. manufacturing sector data.

Stocks rallied Tuesday, with the Dow Jones industrial average recording an 87-point gain, as investors started a holiday-shortened trading week on an optimistic note, applauding news of more corporate mergers and upbeat U.S. manufacturing sector data.

U.S. stock futures pointed to a higher open before Tuesday’s open, lifted by news that Cingular Wireless’ $41 billion all-cash offer has emerged as the winner of a bidding battle for AT&T Wireless. Another lift came from GreenPoint Financial, which said it would be acquired by North Fork Bancorp in a $6.3 billion all-stock deal, creating the nation’s 16th-largest bank.

Shares of the two banks fell. Cingular is a joint venture between SBC Communications, a Dow 30 member, and BellSouth. SBC’s stock price fell 0.7 percent to $24.87; BellSouth’s shares fell 1.7 percent to $29.06. But shares of AT&T Wireless jumped 16.6 percent to $13.78.

The corporate takeover news, coupled with some upbeat manufacturing data, “added enthusiasm to a market that already wants to move higher,” commented Peter Cardillo chief strategist at New York retail brokerage S.W. Bach. “It says corporate America is feeling good about what’s happening in the economy,” he said.

The fairly aggressive bid for AT&T Wireless, which many thought would sell for about $30 billion, sparked a good deal of optimism on Wall Street, said Todd Clark, head of listed equity trading at Wells Fargo Securities. Some hoped the deal would inspire more spending in the telecommunications sector.

“Seeing corporations pay a premium like this for companies could lead some investors to think maybe the market’s still a bit undervalued, so we’re seeing shares drift higher,” Clark said.

The Dow industrials moved steadily higher throughout the trading session, managing a gain of 107 points in late-afternoon trading. They slipped slightly towards the close, finishing the day up 87.03 points, or 0.8 percent, at 10,714.88.

The broader Standard & Poor’s 500-stock index finished Tuesday up 11.18 points, or 1 percent, at 1,156.99, while the Nasdaq composite index was up 26.79 points, or 1.3 percent, at 2,080.35. The U.S. financial markets were closed Monday for President's Day.

There was encouraging news on the economic front from the U.S. Federal Reserve. The Fed reported a rebound in production at the nation’s factories, mines and utilities in January. The 0.8 percent rise in industrial production matched analysts’ forecasts and was welcome following a flat reading in December.

Another report added to hopes of a revival in the manufacturing sector. The New York Federal Reserve's Empire State Manufacturing index rose to a record high of 42.1 in February from a revised 38.9 in January.

More merger news came from entertainment conglomerate Walt Disney, another Dow 30 stock, and cable operator Comcast. Disney said it had unanimously rejected Comcast's unsolicited takeover bid, made last week, as it is too low and endorsed Chief Executive and Chairman Michael Eisner and his strategy for the company.

Later, Comcast reportedly said it is not interested in buying Disney at the entertainment conglomerate's current stock price. Shares of Disney finished flat, but Comcast’s stock price rose 2.8 percent to $30.75.

Further underscoring the ongoing consolidation in the banking sector, Provident Financial Group shot up 11.11 percent to $38.70 after National City Corp. agreed to acquire it for $2.1 billion in stock, creating a larger footprint for the Ohio-based companies.

“The big thing about all this merger and acquisition activity is it’s a confidence builder,” said Peter Dunay, chief market strategist at Wall Street Access, a New York-based brokerage firm. Even so, Dunay said, recent economic reports have fallen short of expectations.

Tuesday’s manufacturing report betrayed an uncertain employment picture in that sector, with factories increasing production while keeping work forces lean. The steady decline of the dollar, which reached an 11-year low against the British pound Tuesday, is also starting to worry some market-watchers.

“All these deals show high-end corporate heads really feel there is a lot of future growth potential,” Dunay said. “But the economy is important here. The thing we keep questioning is whether the market maintain this momentum.”

Among companies reporting earnings Tuesday, heavy equipment maker Deere saw its share price rise 4.7 percent to $67 after the company beat analysts’ expectations on strong sales of agricultural, construction and consumer products, and a continued effort to hold down costs. The weaker dollar also helped boost foreign sales.

Overseas, Japan’s Nikkei average finished Tuesday up 0.2 percent. In Europe, France’s CAC-40 closed up 0.7 percent, Britain’s FTSE 100 rose 1.2 percent and Germany’s DAX added 0.6 percent.

Reuters and the AP contributed to this report