U.S. Stocks Pull Higher As Oil Dips; HP May Bid For EDS

NEW YORK (MarketWatch) -- U.S. stocks rose on Monday, with investor moods' brightened by oil's retreat from record highs, and a late afternoon report that Hewlett-Packard Co. is near a deal to buy Electronic Data Systems Corp. for as much as $13 billion,.

After climbing nearly 150 points, the Dow Jones Industrial Average rose 130 points, or 1%, to end at 12,876, with 27 of its 30 components posting gains.

The blue-chip gains were broad based, led by Caterpillar Inc. , up 2.5%, and Wal-Mart Stores Inc. , ahead 1.5%.

Dow decliners included Hewlett-Packard , down 4.7%, in the wake of an afternoon report by the Wall Street Journal that the technology giant could unveil as early as Tuesday an agreement to acquire EDS .

Shares of the tech outsourcing firm surged 27.9% in the wake of the news, helping lift the technology-heavy Nasdaq Composite Index , which added 42.97 points, or 1.8%, to 2,488.49.

Overall, the S&P 500 rose 15.3 points, or 1.1%, to 1,403.5, led by the financial and consumer-discretionary sectors, both up more than 2%.

Retail stocks, such as Macy's and JC Penney posted big gains as crude oil prices slumped on the New York Mercantile Exchange. Crude oil finished at $124.23 a barrel, down $1.73 for the session. .

With crude oil surging to record last week, investors have been selling consumer-related stocks amid concerns that the weakening job market along with surging gasoline and food prices will further dampen consumption.

Financials bounce

The financial sector was lifted by shares of MBIA Inc. , which rose 4.5% after the bond insurer restated earnings higher.

"The news out of financial stocks is, anything negative is almost a positive," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. "The capital race continues, the write-offs continue, but the market reaction is different than it once was."

"It seems like they [MBIA] have enough capital to continue to operate, at least until the next go-round -- I think the market is believing we are close to the end on the need to raise capital," he said.

In a statement posted on its Web site, MBIA also issued a correction to its earlier statement for total revenue generated in the first quarters of 2007 and 2008. .

Techs join in

The technology sector of the broad S&P 500 index rose 1.5%.

"Technology seems to have some legs coming out of earnings season, there was concern over inventory buildup, but in general, technology did better than expected," said Fitzpatrick.

Besides the possible HP deal with EDS, techs were also bolstered by Research In Motion Ltd. , shares of which were recently up 6.9% after hitting a high of $141.97 earlier on. The mobile-phone maker introduced a new BlackBerry model. .

Gold futures closed lower, with the contract for June delivery closing at $884.8 an ounce, down 90 cents for the session. .

The dollar rose against most other currency rivals amid talk of "verbal intervention" by U.S. officials seeking to boost the greenback, with The Wall Street Journal reporting an attempt by the Bush administration to put a floor under the dollar. .

Volume on the New York Stock Exchange neared 3.3 billion, with advancing stocks outpacing those declining by more than 2 to 1. On the Nasdaq, more than 1.7 billion shares changed hands, as advancers topped decliners, also by more than 2 to 1.

U.S. stocks dropped sharply on Friday, after hefty losses from blue-chip insurance giant AIG and another record high for oil prices.

On Monday, AIG was among the stocks weighing on the Dow, off a further 4.7%.

"The market looks tired of rallying on bad news. After reaching up toward technical resistance, the averages began their pullback phase," said Marc Pado, U.S. market strategist at Cantor Fitzgerald. "While the momentum indicators are nearing neutral, it looks like we need oil to get off o our backs to focus on anything else."

On the economic front, Chicago Federal Reserve Bank President Charles Evans said in a speech early Monday that the outlook remains uncertain because of instability in the credit markets and housing sector. .

Active issues

With oil prices creating a significant headwind, shipper FedEx Corp. late Friday warned that fourth-quarter profit would be hurt on fuel costs and weak volume.

"The unrelenting rise in the price of oil is impacting company statements and how investors are looking at stocks. FedEx was the latest in a long line of casualty stocks reporting that they can no longer absorb the rising cost of fuel without it affecting the bottom line," added Pado.

Shares of banking giant HSBC Holdings rose 3.1% after reporting a higher first-quarter profit, as emerging-markets growth offset $3.2 billion in U.S. loan impairments and $2.6 billion in global markets write-downs. The lender also sounded worries over inflation.

Sprint Nextel Corp. also reported red ink, with the carrier losing $505 million and the loss of more than 1 million of its most profitable customers in the first three months of 2008. The wireless carrier's shares fell 1.5%. .

Cablevision Systems Corp. reached an agreement to buy 97% of New York newspaper Newsday for $632 million plus $18 million in prepaid rent.

Investors bid shares of Cablevision lower by 1.8%.

In Europe, stocks were firm as investors bought into stocks positively geared to higher oil prices. .

Overnight, Asian markets ended mostly higher, reversing course and erasing losses earlier on. .

By Kate Gibson