MARKET SNAPSHOT: U.S. Stocks Rise As Deal Activity Fuels Optimism

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks climbed on Tuesday, with financials leading the gains, after a large banking acquisition heightened the belief that more such cross-border deals are possible.

"This is just the start; expect more cross-border linkups," Anthony Michael Sabino, professor of law and business at St. John's University in New York, said of Toronto-Dominion Bank's $6.3 billion takeout of Chrysler Financial.

"Unencumbered by toxic assets, the larger and stronger Canadian banks are in a prime position to scoop up U.S. financial firms in need of rescue," said Sabino in predicting further acquisitions of U.S. financial firms by banks in Canada.

The Dow Jones Industrial Average (DJI) gained 52.76 points, or 0.5%, to 11,530.89, with 20 of its 30 components on the rise, led by blue-chip banks, with J.P. Morgan Chase & Co. (JPM) up 3%, American Express Co. (AXP) ahead 2.1% and Bank of America Corp. (BAC) gaining 1.8%.

The Dow "has made three attempts to close above 11,500 over the last 10 days and failed each time. That level appears to be a troublesome technical price resistance point that could prove stubborn to penetrate this week," noted Fred Dickson, chief investment strategist at Davidson Cos.

Rising for a fourth consecutive session, the Standard & Poor's 500 Index (SPX) climbed 7.11 points, or 0.6%, to 1,254.194. The financial sector proved the best performer among the index's 10 industry groups, while consumer staples lagged.

The Nasdaq Composite Index (RIXF) gained 16.28 points, or 0.6%, to 2,665.82.

On Monday, both the S&P 500 and Nasdaq notched new 2010 closing highs, levels that could keep funds from looking to hike their cash or take a more cautious stance ahead of the new year, analysts said.

"It's sort of a self-fulfilling prophecy. What can't take the market down will only make it stronger," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

For every issue that fell, two advanced on the New York Stock Exchange, where volume approached 377 million at 1:15 p.m. Eastern.

On Monday, NYSE volume was a mere 830 million shares, versus a 10-week average of 1.06 billion.

"Yesterday's volume might be an early warning that this year's seasonally slow week may be even more dramatic than anticipated," said Pado.

Adobe Systems Inc. (ADBE) gained after the graphic-software maker reported a profit that beat expectations. Jabil Circuit Inc. (JBL) also climbed after its outlook exceeded Wall Street projections.

"Tech has been a powerful leadership group, so this kind of positive forward-looking comment could help," offered Pado.

In addition to Toronto-Dominion Bank's (TD) agreement to acquire the lending arm of auto manufacturer Chrysler, Dutch chemicals company Royal DSM NV said it plans to purchase biotechnology firm Martek Biosciences Corp. (MATK) for $1.09 billion.

As Wall Street winds down the year, investors could view their dividend glass as either half full or half empty, depending on one's perspective.

Dividend income climbed 8.8% in 2010, and a 9% hike is likely in store in the year ahead, according to Howard Silverblatt, a senior index analyst at S&P Indices.

The less cheery news is that dividend payments remain 18.5% below where they stood in 2008, and it won't be until 2013 for dividends to return to those loftier levels, writes Silverblatt in a Tuesday research note.