Merger news from Sanofi, Bucyrus drives stocks up

Another wave of corporate deal making stoked investors’ confidence in the economy and carried stocks sharply higher Monday.

Analyst upgrades of bellwethers Alcoa and Intel and positive momentum on President Obama’s healthcare overhaul also boosted stocks.

The Dow Jones industrial average gained 85 points, jumping into the black for the month.

Optimism about the economy also pushed up Treasury yields and the dollar. The greenback’s rise, meanwhile, depressed prices of many commodities.

Stocks got an early boost after French drug maker Sanofi-Aventis announced plans to buy U.S. healthcare products company Chattem for $1.9 billion. Shares of the Chattanooga, Tenn., firm soared 33% on the news.

In other takeover news, mining equipment maker Bucyrus International said it planned to buy a unit of Terex for $1.3 billion. Dutch automaker Spyker Cars submitted a new offer to buy Saab from General Motors.

Robert Pavlik, chief market strategist at Banyan Partners, said the flurry of deal activity was an encouraging sign of strength in the economy.

“Companies are revealing that they are in a better position financially,” he said. “If they weren’t feeling as confident, you wouldn’t see this type of activity occurring.”

The deals announced Monday followed Exxon Mobil‘s $29-billion deal to buy XTO Energy last week.

The Dow rose 85.25 points, or 0.8%, to 10,414.14, after being up more than 130 points early in the day. The surge put the blue chips up 0.7% for the month to date.

Broader indexes posted stronger gains Monday. The Standard & Poor’s 500 index rose 11.58 points, or 1.1%, to 1,114.05. And the Nasdaq composite index climbed 25.97, or 1.2%, to 2,237.66, helped by the analyst upgrade of Intel.

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

About three stocks rose for every one that fell on the New York Stock Exchange.

The yield on the benchmark 10-year Treasury note climbed to 3.68% from 3.54% late Friday.

The dollar rose against other major currencies, making commodities more expensive for foreign buyers. Near-term oil futures fell 89 cents to settle at $72.47 a barrel.

Gold futures fell $15.40 to $1,095.40 an ounce, dropping below $1,100 for the first time since early November.

Shares of health insurers rallied after Congress delayed a new tax on them under still-evolving legislation to overhaul the healthcare system. Cigna rose 3.9%. Aetna surged 4.7%.

The tax, which totals about $70 billion over 10 years, was to start next year under a previous version of the plan. The latest version postpones much of the tax until after other parts of the measure take effect.

In other market action, Alcoa shot up 7.9% after Morgan Stanley upgraded the stock based on a forecast of higher aluminum prices. Also helping was Alcoa’s announcement of an $11-billion joint venture in Saudi Arabia.

Overseas, key stock indexes rose 1.9% in Britain, 1.7% in Germany, 2.1% in France and 0.4% in Japan.