Stocks rise as dealmaking boosts investor confidence

— -- Investors regained some confidence Monday after the announcements of several large corporate buyouts.

Stocks jumped Monday after Abbott Laboratories said it would buy the pharmaceutical business of Belgian chemicals maker Solvay for $6.6 billion and Xerox agreed to acquire Affiliated Computer Services for about $6.4 billion.

Seeing recent deal activity as a sign that companies see value in stocks, investors pushed the Dow Jones industrial average up 124.17 points to 9789.36. The Dow is up 11.5% this year.

Lifted primarily by stocks in the health care facilities, diversified real estate investment trust and multiline insurance industries, the Standard & Poor's 500 index rose 18.60 points to 1062.98. The S&P 500 is up 17.7% this year. The Nasdaq composite index rose 39.82 to 2130.74, pushing it up 36.8% this year. The USA TODAY Internet 50 index added 2.4% and is up 49.2% this year.

With stocks trading at "fair value," investors need something extra to make them feel better about buying stocks, says Robert Maltbie of Singular Research. Xerox's announcement it is buying Affiliated Computer Services and Abbott Laboratories saying it's buying a unit of chemical maker Solvay helped.

The takeover moves are a welcome sign that businesses have enough faith in a recovery in the economy to pursue acquisitions. In the past year, companies grew so worried about the economy that they were hesitant to part with cash and often had trouble lining up financing.

The stock market's rise breaks a three-day slide that gave the market its worst week since early July. The losses were modest given how far stocks have climbed since major indexes slid to 12-year lows on March 9. The S&P 500 index is up 54.4% since then.

But investors need to get solid earnings reports and encouraging outlooks when companies report third-quarter results shortly to justify stock prices. "We're at a crossroads," Maltbie says. "Where will the surprise come from?"