U.S. Stock Indexes Lifted As Oil Falls More Than $3.50 A Barrel

NEW YORK (MarketWatch) -- U.S. stocks on Monday swung solidly higher as a rising dollar and a drop in commodities prices -- including crude oil falling as much as $5.0 a barrel -- helped offset caution about second-quarter earnings season.

"The market is in the midst of a rally, and we can thank the stronger dollar and (falling) oil prices for giving way to some bargain hunting here after last week's major decline," said Peter Cardillo, chief market economist at Avalon Partners.

"It increases the case for the market to have some sort of technical bounce ahead of earnings and economic news later in the week," he said.

The Dow Jones Industrial Average climbed 80.85 points to 11,369.39, with 20 of its 30 components posting gains.

Equities drew support as a stronger greenback , and an easing of tensions between Iran and the West weighed on the price of oil, with the August contract losing $4.14 to $141.15 a barrel. . Demand for gold also fell, with futures for August delivery falling $15.40 to $918.20 an ounce. .

"One of the reasons for the stronger dollar is there is hope that the G8 will make a stronger case for stronger dollar, due to the fact that the global economy beginning to show signs of real stress due to higher oil prices," said Cardillo of the meeting of Group of Eight world leaders currently being held in Japan.

Treasuries were little changed, with the yield on the 10-year note at 3.98%. .

The Dow's advance was led by Alcoa Inc. , lately up 4.7%, ahead of the aluminum producer's earnings report after the close Tuesday.

Also adding support, General Motors Corp. , climbed 2.8%, with shares of the biggest U.S. automaker bolstered by crude's fall and a Wall Street Journal Report that GM is considering more job cuts and whether to close more brands.

Drug manufacturer Merck & Co. Inc. fronted losses on the Dow, its stock down 3.6%, following its downgrade to neutral from buy at UBS.

Shares of Walt Disney Co. also weighed on the Dow, with shares of the entertainment company falling 1.7% after a downgrade by Lehman Brothers.

The S&P 500 gained 6.84 points to 1,269.74, with information technology leading gains among the S&P's 10 industry groups, the sector recently up 1.4%, with only financials falling, recently down 1.6%.

"This week's earnings results mark the official start of the earnings season, but outside of General Electric, investors are mainly focusing on the banks and the credit crisis," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

The technology-laden Nasdaq Composite added 19.93 points to stand at 2,265.31, bolstered in part by Microsoft Corp. , which said it is open to discussing a "major transaction" with a new board of directors at Yahoo Inc. .

Shares of Microsoft gained 0.8% while Yahoo soared 9.1%.

Late-morning volume on the New York Stock Exchange came to 335 million shares, with advancing issues just ahead of those declining. On the Nasdaq, nearly 239 million shares traded, and advancers also just ahead of those declining.

U.S. stocks ended lower during the holiday-shortened week, with the Dow Jones Industrial Average falling into bear-market territory.

Monday's economic calendar was light, with a speech from non-voting San Francisco Fed President Janet Yellen the highlight.

Active issues

The Journal also reported Merrill Lynch & Co. is inching closer to selling ownership stakes in investment manager BlackRock Inc. and information provider Bloomberg LP.

Shares of Merrill fell 0.3% and BlackRock issues declined 1%.

"The still-distressed state of balance sheets at banks and other financial intermediaries suggests the credit creation mechanism is likely to remain impaired for the near future, dulling the impact of Fed rate cuts on the economy," said Lehman Brothers analyst Zach Pandl.

And, General Electric Co.'s NBC Universal led a goup buying the Weather Channel in what is expected to be a multi-billion-dollar deal. Terms weren't disclosed.

Germany's Fresenius said it's going to buy APP Pharmaceuticals Inc. for up to $4.6 billion.

InBev announced a rival slate of directors for Anheuser-Busch Companies Inc. that includes Adolphus Busch IV, the uncle of the Budweiser maker's chief executive, August Busch IV.

Milwaukee bank Marshall & Ilsley Corp. warned of a provision of at least $900 million in the second quarter to cover loan losses from the slumping housing market.

Teva Pharmaceutical Industries Ltd. shares were as much as 6.8% lower in Tel Aviv after the company said that in a Phase III study, a 40-milligram dose of its Copaxone multiple-sclerosis treatment was no more effective in reducing the relapse rate than the approved 20mg dose.

Overseas, the Nikkei 225 ended a 12-session losing run with a 0.9% rise. In London, the pan-European Dow Jones Stoxx 600 index jumped 1% to 282.43. .

By Kate Gibson