Bank stocks rose sharply after Bank of America Corp. (NYSE:BAC - news), the third-biggest U.S. bank, said it agreed to buy FleetBoston Financial Corp. (NYSE:FBF - news), the No. 7 bank, for nearly $47 billion in stock, likely paving the way for more deals in the sector.
In the other hefty deal, Anthem Inc. (NYSE:ATH - news) said it would buy WellPoint Health Networks Inc. (NYSE:WLP - news) for $14.1 billion, creating the nation's largest health insurer, with vast negotiating power across the health care industry.
The return of large-scale mergers, rarely seen since the late 1990s stock boom, sends a signal to the market that corporations have confidence in business fundamentals and are comfortable with the prices of stocks.
"If people get the impression that M&A is going to pick up -- that has been quite low recently -- that's optimistic for the market as a whole," said Edgar Peters, chief investment officer at PanAgora Asset Management. "Plus, the market had sold off last week, so it was a good time for a rebound."
The Dow Jones industrial average (^DJI - news) was up 25.85 points, or 0.27 percent, at 9,608.31. The broader Standard & Poor's 500 Index (^SPX - news) was up 1.7 points, or 0.17 percent, at 1,030.61. The technology-laced Nasdaq Composite Index (^IXIC - news) was up 11.79 points, or 0.63 percent, at 1,877.38.
The Nasdaq suffered its second straight down week last week, while the Dow and the S&P 500 snapped a five-week string of gains.
FleetBoston's shares surged $7.70, or 24 percent, to $39.50, while Bank of America slumped 10 percent, or $8.06, to $73.80.
Other banks rose as investors bet on more deals in the sector. Comerica Inc. (NYSE:CMA - news) rose $2.81, or 6 percent, to $49.73, while SunTrust Banks Inc. (NYSE:STI - news) shares rose 3.51, or 5.5 percent, to $67.04.
Shares of Anthem tumbled $7.18, or 9.3 percent, to $70.08, while WellPoint shares were up $6.46, or 7.7 percent, at $90.40.
Two reports demonstrated that the housing sector -- an island of strength in an otherwise patchy economy -- is still holding its own. [End]
...Sales of new U.S. homes slipped 0.2 percent in September but still remained stronger than expected, the government reported. Separately, the National Association of Realtors reported sales of existing U.S. homes rose unexpectedly in September, jumping 3.6 percent to a new record. *** [End]