Takeover Deals Boost Wall Street

A handful of big takeover deals buoyed Wall Street on Monday, and major market indexes ended with modest gains after last week’s drubbing.

But after-the-bell earnings reports from Alcoa and Genentech were poorly received by investors, raising new questions about the market’s ability to sustain an uptrend. A sales warning from chip maker Advanced Micro Devices also hurt the mood.

In other trading, the dollar halted its recent rally against the euro.

The stock market rose early in the day, finding its footing after a sell-off last week that drove most indexes lower in four of the year’s first five sessions.

The Dow Jones industrial average was up as much as 60 points before pulling back in the final two hours of the session. The index ended with a gain of 17.07 points, or 0.2%, at 10,621.03.

Among broader indexes, the Standard & Poor’s 500 closed up 4.06 points, or 0.3%, at 1,190.25, and the technology-dominated Nasdaq composite gained 8.43 points, or 0.4%, to 2,097.04.

Winners topped losers by 3 to 2 on the New York Stock Exchange and by about 5 to 4 on Nasdaq.

Merger announcements helped boost market sentiment. Telephone company Alltel said it would buy Western Wireless for $4.3 billion, video rental chain Movie Gallery agreed to acquire rival Hollywood Entertainment for $850 million, and News Corp. bid $5.9 billion for the 18% of Fox Entertainment it doesn’t already own.

The takeover bids suggested that corporate executives see value in stocks at current prices, analysts said.

Wall Street had suffered broad-based losses last week as profit takers sold shares after a 10-week rally that lifted major indexes to three-year highs by late December.

The Dow fell 1.7% last week, the S&P; 500 dropped 2.1% and Nasdaq sank 4%.

On Monday, buyers hunted for bargains among home builders, tobacco companies, health maintenance organizations and Internet-related firms.

The Russell 2,000 index of smaller stocks, which sank 5.9% last week, added 0.7% to 617.74.

Fourth-quarter profit reports are likely to be the market’s major hurdle this month. The season got off to a shaky start Monday as aluminum giant Alcoa and biotech leader Genentech reported results that fell shy of analysts’ expectations.

Alcoa fell as low as $30.02 in after-hours trading. The shares had slipped 22 cents to $30.47 in regular trading.

Genentech, which gained 18 cents to $54.43 in regular trading, fell to about $52 after hours.

Earnings reports “will really determine where we’re going to go” in the market, said Peter Cardillo, chief strategist at S.W. Bach & Co. in New York. “And the key with earnings will be guidance for 2005,” as executives comment on the outlook for sales and profit, he said.

A big test for the market may loom today: Chip giant Intel will report its fourth-quarter results after regular trading ends.

Rival Advanced Micro Devices set a poor tone for Intel’s report by warning late Monday that fourth-quarter sales would be below analysts’ forecasts. AMD shares fell to $18.55 in after-hours trading after gaining 21 cents to $20.13 in regular trading.

In currency trading, the dollar fell against the euro for the first time in seven sessions. The euro ended at $1.309, compared with $1.305 on Friday.

Analysts said the dollar’s surge against the euro since year’s end had left the U.S. currency ripe for profit taking.

In commodity trading, near-term crude oil futures in New York reached $47.30 a barrel at midday, the highest since Dec. 1, but sellers pushed the price down by the session’s end to $45.33, off 10 cents from Friday.

Treasury bond yields were little changed, even though Jack Guynn, president of the Federal Reserve Bank of Atlanta, said in a speech that the central bank had no commitment to raising short-term rates at a “measured” pace -- a term the Fed has used in its meeting summaries.

Guynn’s comments suggested that the Fed could become more aggressive in tightening credit, some analysts said.

The 10-year Treasury note yield was unchanged at 4.27%.