Stocks rise on Pfizer-Wyeth deal, home sales data

Stocks finished moderately higher Monday after zigzagging in response to a mix of earnings and economic news.

An agreement by Pfizer to acquire rival drug maker Wyeth lifted the market by showing that takeovers could still take place despite the recession. And the National Assn. of Realtors said sales of existing homes rose in December, stirring hopes that lower prices and falling interest rates are starting to erase a glut of properties.

But news from big companies weighed on the market. Shares of Caterpillar tumbled 8.4%, curbing the advance in the Dow Jones industrial average, after the maker of heavy equipment, citing the global economic slowdown, reported a 32% drop in profit and cut its 2009 earnings forecast. The company said it would offer buyouts to 25,000 employees in the United States and cut executive pay.

Another Dow component, Home Depot, said it would slash 7,000 jobs and close its Expo home-design chain in response to the weak housing market.

The Dow rose 38.47 points, or 0.5%, to 8,116.03, after briefly moving into negative territory. The advance for the day was just the sixth by the Dow this month; after an end-of-the-year rally, the market has been hit by worries about the economy, corporate earnings and the health of the banking industry.

The Standard & Poor’s 500 index rose 4.62 points, or 0.6%, to 836.57, and the Nasdaq composite index rose 12.17 points, or 0.8%, to 1,489.46.

The Russell 2,000 index of smaller companies jumped 1.3%.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange.

McDonald’s gained 38 cents to $58.40. The fast-food giant posted better-than-expected fourth-quarter earnings and a jump in same-store sales. The company’s low prices have been a draw for consumers worried about the economy.

After the closing bell, chip maker Texas Instruments posted a sharp drop in fourth-quarter profit and said it would eliminate 3,400 jobs, 1,800 of them via layoffs. The company also said its fourth-quarter earnings fell sharply.

Concerns about the banking industry added to the market’s uncertainty, and most financial stocks fell.

After the end of trading, American Express reported fourth-quarter earnings that missed analysts’ estimates by a penny. The stock was little changed in late trading after falling 5% during the regular market session.

Yields on Treasury bonds rose along with stocks. The benchmark 10-year Treasury note climbed to 2.64% from 2.62% late Friday.

The dollar fell against other major currencies, while gold prices rose above $900 an ounce.

Oil futures slipped 74 cents to settle at $45.73 a barrel on the New York Mercantile Exchange.

Overseas, key stock indexes surged 3.9% in Britain, 3.5% in Germany and 3.7% in France. Shares fell 0.1% in Japan.