By Leah Schnurr
A rare piece of good news for the recession-hit economy also helped sentiment, as sales of existing U.S. homes unexpectedly jumped 6.5 percent in December. The Dow Jones index of home builders' stocks <.DJUSHB> rose 2.7 percent.
Pfizer Inc
"We haven't seen any big deals in a while (so) it's an indication that there is potential for some deals to get done," said Kurt Brunner, portfolio manager at Swarthmore Group in Philadelphia.
Caterpillar
The Dow Jones industrial average <.DJI> rose 38.47 points, or 0.48 percent, to 8,116.03. The Standard & Poor's 500 Index <.SPX> added 4.62 points, or 0.56 percent, to 836.57. The Nasdaq Composite Index <.IXIC> gained 12.17 points, or 0.82 percent, to 1,489.46.
The modest gains enabled the Dow to break a two-day losing streak. The broad S&P 500 is down more than 7 percent for the year so far, but it is up about 11 percent from the 11-year lows hit in late November. The S&P started the year up about 20 percent from those lows.
Home Depot
Companies across all sectors have been chopping jobs as they deal with slowing consumer demand and the fallout from the global economic downturn.
Pfizer tumbled 10.3 percent to $15.65 on worries over what benefits -- if any -- it may reap from the acquisition, which had been rumored since last week. It is the biggest non-financial deal since March 2008. Wyeth retreated from earlier gains, falling 0.8 percent to $43.39.
"I think there might be some questions about, all in all, what does it bring them," Brunner said of the Pfizer-Wyeth deal.
"Is this the solution that they need to offset the Lipitor (patent) expiration? And the fact that their pipeline isn't great, does this get them a big pipeline? That could be argued."
Financials turned lower in the afternoon and capped gains as investors fretted over whether the sector, which is at the heart of the credit crisis, will need to raise yet more capital. The S&P financial index <.GSPF> fell 2.1 percent.
Among financial-sector laggards, Regions Financial Corp
Volume was moderate on the New York Stock Exchange, where about 1.27 billion shares changed hands, below last year's estimated daily average of 1.49 billion. On the Nasdaq, about 1.84 billion shares traded below last year's daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by 1,983 to 1,076, while on the Nasdaq, the trend also held, with 1,659 advancers to 1,039 decliners.
(Editing by Jan Paschal)