Major U.S. stock indexes, after seesawing in morning trading, finished higher Monday as Wall Street headed into second-quarter earnings season with optimism, though a disappointing report from Alcoa (AA; +1.7%) released after the closing bell may dampen sentiment on Tuesday.
Falling bond yields also offered encouragement to equity players. Some M&A activity, including a higher takeover bid for chemicals outfit Huntsman Corp. (HUN; +0.3%) and speculation in Barron's that FedEx Corp. (FDX; +4.8%) might be a buyout target, likely provided some ballast for equities, notes Standard & Poor's MarketScope.
Monday's session was marked by light trading volume and an absence of significant economic data. The Dow Jones industrial average gained 38.29 points, or 0.28%, to 13,649.97. The broader S&P 500 index was up 1.41 points, or 0.09%, to 1,531.85.
The tech-heavy Nasdaq composite index was higher by 3.51 points, or 0.13%, at 2,670.02.
Alcoa (AA; +1.7%) kicked off second-quarter earnings season after the close of trading Monday with a bit of a disappointment. The aluminum giant reported second quarter income from continuing operations of 81 cents per share on revenue of $8.1 billion, shy of the analyst consensus estimates of 82 cents and $8.4 billion compiled by Reuters. The shares fell over 1% in after-hours trading Monday.
Other notable names reporting this week include Yum! Brands (YUM; -0.7%) on Wednesday and Marriott International (MAR; -0.2%) on Thursday.
In the first quarter, corporate earnings beat analysts' estimates and helped push stocks to record levels. "Not a lot has changed from the first quarter that would suggest they can't do so again," says Todd Salamone of Schaeffer's Investment Research. However, Salamone says, the question is how much the market already expects stocks to beat those estimates.
With recent economic data suggesting a stronger third-quarter GDP, Tuesday's report on wholesale inventories could help to firm up the degree to which inventories will positively contribute to second-quarter growth. Also on Tuesday, a speech by Federal Reserve chairman Ben Bernanke on inflation could provide some insight on Fed thinking.
Looking further ahead, investors will be eying initial jobless claims figures on Thursday. Retail sales, Michigan consumer sentiment and business inventories are on the economic calendar for this Friday.
Crude oil futures were lower on Monday. August WTI crude futures were off 62 cents to $72.19.
Among stocks in the news on Monday, Lexmark International (LXK; -6.4%) was lower after it said it expects lower-than-expected earnings in the second quarter, with revenue 2% lower due to problems in its consumer market segment.
Sequa Corp. (SQA.A; +53%) surged more than 50% after it agreed to be acquired by the Carlyle Group in a $2.7 billion deal, or $175 in cash per share.
Johnson & Johnson (SQAA; +1.0%) shares gained after the healthcare giant announced a $10 billion stock buyback plan.
First Solar (FSLR; +24%) shares shot higher after the company said it had entered into five agreements for the manufacture and sale of solar modules totaling 685 MW. The agreements are expected to allow for sales of approximately $1.28 billion over the 2007-2012 period.
Coventry Health (CVH; -0.5%) agreed to acquire Florida Health Plan Administrators, a firm with revenues of about $1.2 billion and the owner of Vista Healthplans, for $685 million.
Google (GOOG; +0.6%) agreed to buy Postini, an on-demand communications security and compliance services provider for about $625 million in cash.
KBR Inc. (KBR; +13%) was moving higher after it was awarded a $2.8-billion contract for a liquified natural gas project in Algeria.
Yahoo Inc. (YHOO; +0.4%) was reportedly downgraded by Think Equity analysts from buy to accumulate.
Home Depot (HD; -0.2%) was reportedly upgraded by a Goldman Sachs analyst from hold to buy.
European indexes moved higher on Monday. In London, the FTSE 100 index was up 0.34% to 6,712.7. In Paris, the CAC 40 index edged up 0.03% to 6,104.66. Germany's DAX index added 0.36% to 8,077.39.
Asian markets were also higher. Japan's Nikkei 225 index gained 0.67% to 18,261.98. In Hong Kong, the Hang Seng index climbed 1.27% to 22,817.43. In mainland China, Shanghai's benchmark index rose 2.69% to 3,883.22.
Treasuries rose Monday, reflecting some mild short covering after losses last week leading up to and following the Friday release of the June employment report. The 10-year note rose 06/32 in price to 94-00/32 for a yield of 5.15%. The 30-year bond climbed 11/32 to 92-20/32 for a yield of 5.24%.