Deals, Cisco Push Up Stocks

A burst of merger activity and an analyst upgrade of Cisco Systems perked up the stock market on Monday, helping major indexes to recoup some of last week's losses.

The Dow Jones Industrial Average, which is coming off a 1.6% drop that represented its worst weekly performance since early July, was recently up 1.2%, or 115 points, at 9780.

Its strongest component in percentage terms was Cisco, up 4.6%, after analysts at Barclays Capital upgraded the networking company to an "overweight" rating from "equal weight," citing an improved outlook for its business in both Europe and North America.

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The technology-focused Nasdaq Composite Index was up 1.7%, the best performance of any of the major indexes. The S&P 500 was up 1.4%, helped by gains in every category. Its information technology and telecommunications sectors were strong, as was its industrial sector. Most sectors rose 1% or more.

Elsewhere, investors responded to deal news at several bellwethers. A pickup in merger activity tends to boost the market because it sets off a guessing game among investors who begin to buy shares of companies they believe are likely acquisition targets.

Xerox dropped 15% after it agreed to pay $6.4 billion of cash and stock for outsourcing and information-services company Affiliated Computer Services. ACS surged 16%.

Abbott Laboratories climbed 4% after it said it will buy the pharmaceutical business of Belgium's Solvay for as much as $7 billion in a deal that would expand its presence in emerging markets.

Johnson & Johnson said it bought 18.1% of Crucell for $442.7 million and will pay development milestones and royalty payments if flu vaccines the two firms will develop make it to the market. Crucell shares sank 6%. Johnson & Johnson gained 0.5%.

Japan's Nikkei 225 Average fell 2.5% as exporters' shares were hurt by the strengthening of the yen against the dollar. In recent trading, the dollar was at 89.40 yen, down from 89.85 yen late Friday in New York. Elsewhere in Asia, China's Shanghai Composite declined 2.7% and Hong Kong's Hang Seng Index shed 2.1%.

But in Europe, stocks were climbing. London's FTSE 100 was higher by about 0.7% and Germany's DAX was up about 1.5% after Sunday's election in which incumbent Chancellor Angela Merkel's center-right coalition won that country's national elections, setting the stage for tax cuts and labor-market changes.

Front-month crude-oil futures were down 17 cents at $65.85 a barrel. Gold was higher by about $1 to $993 an ounce. Treasury prices were flat.