Stocks climb after United agrees to deal with Continental; manufacturing, construction improve

Stocks rise on economic news, airline merger

NEW YORK — The stock market jumped Monday after improved economic reports and a deal to combine United and Continental Airlines raised expectations about a recovery.

The Dow Jones industrial average rose about 150 points in afternoon trading to extend a series of sharp swings in the past week. The Dow and broader indexes all climbed more than 1 percent.

United is acquiring Continental in a stock buyout worth about $3 billion. Corporate dealmaking is seen as another sign the economy is improving and companies are comfortable making commitments to expand their businesses.

Reports on manufacturing, construction spending and consumer spending also boosted expectations that the economy is bouncing back.

The Institute for Supply Management said that U.S. manufacturing activity expanded at the fastest pace in nearly six years. The trade group’s manufacturing index rose to 60.4 in April from 59.6 in March. Economists expected a reading of 60. Manufacturing has shown consistent signs of a rebound in recent months as production picks back up.

The Commerce Department said construction activity rose 0.2 percent in March, the first gain since October. Economists expected a drop. However, the figures for February were revised lower.

The agency also reported that personal spending rose 0.6 percent in March, the biggest jump in five months. Consumer spending accounts for the bulk of economic activity in the country, so growth is a welcome sign of recovery.

The report found that personal income rose just 0.3 percent, renewing concerns that growth in spending could slow if wage growth doesn’t pick up further. Both the income and spending figures matched forecasts from economists polled by Thomson Reuters.

Analysts said the combination of United and Continental is a sign of confidence that the economy is improving.

“The merger in the airlines is great. As you begin to see mergers that means there is value out there,” said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.

The market has been swinging in the past week on investor indecision about the risks that face the economy. Economic numbers and concern about government debt loads in Europe are making traders quick to jump in and out of the market. The Dow has risen or fallen by more than 100 points in four of the past six days.

Stocks are rebounding from a disappointing end to April. The market tumbled Friday following mixed economic reports and concerns about a criminal investigation of Goldman Sachs. The government reported the nation’s economy grew at a slower pace in the first quarter than had been forecast and a report on consumer sentiment showed a drop in confidence in April. The Dow fell 158 points and ended eight straight weeks of gains.

In midafternoon trading, the Dow rose 156.14, or 1.4 percent, to 11,164.75. The broader Standard & Poor’s 500 index rose 16.28, or 1.4 percent, to 1,202.97, and the Nasdaq composite index rose 39.96, or 1.6 percent, to 2,501.15.

Bond prices fell after demand for safety holdings eased. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.70 percent from 3.66 percent late Friday.

The dollar rose, while gold increased.

Crude oil rose 76 cents to $86.91 per barrel on the New York Mercantile Exchange after the array of reports Monday signaled that demand for energy will increase as the economy improves. Traders also watched developments of the Gulf oil spill. There are concerns that the fallout from the April 20 accident could disrupt supplies and refining capacity. That would drive the price of oil higher and could hurt the economy.

Asian markets fell after China forced banks to increase their reserves as part of the country’s efforts to curb inflation and avoid speculative real estate bubbles.

European markets were volatile after the European Union and the International Monetary Fund agreed to provide Greece with $145 billion over the next three years to help it with its ongoing debt problems. European shares closed higher after U.S. stocks rose.

Germany, the EU’s biggest member, still has not approved its share of the bailout for Greece. Germany is expected to provide Greece with $11.14 billion in the first year of the three-year bailout package.

Investors are still skittish about Greece’s ability to get its debt problems under control and the potential for other European nations to face similar issues. The euro is again falling sharply against the dollar, hovering near its lowest levels of the past year.

Shares of Goldman Sachs rose $4.86, or 3.4 percent, to $150.06 after billionaire investor Warren Buffett said over the weekend that he doesn’t think the investment bank committed fraud. The SEC has accused the company of wrongdoing in a deal involving mortgage securities deals it set up.

United rose 39 cents, or 1.8 percent, to $21.99, while Continental climbed 40 cents, or 1.8 percent, to $22.75.

Ford Motor Co. rose 30 cents, or 2.3 percent, to $13.32 after posting a 25 percent increase in its April sales.

General Motors Co.’s sales rose 6.4 percent last month. Sales from Chevrolet, Buick, GMC and Cadillac, which the company isn’t phasing out, rose 20 percent.

Apple Inc. rose $6.47, or 2.5 percent, to $267.56 after the company said it sold 1 million of its iPad tablet computers in the month since it introduced the product.

Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 627 million shares compared with 748 million traded at the same point Friday.

The Russell 2000 index of smaller companies rose 14.16, or 2 percent, to 730.76.

Germany’s DAX index rose 0.5 percent, and France’s CAC-40 rose 0.3 percent. Britain’s FTSE 100 was closed for a bank holiday. Hong Kong’s Hang Seng fell 1.4 percent, while markets in Japan were closed for a holiday.