US Stocks Pare Gains But Blue Chips Advance As Alcoa, Merck Are Strong

U.S. blue-chip stocks added to multi-year highs as investors drew encouragement from dealmaking and earnings, though stocks pared early gains that followed the killing of al Qaeda leader Osama bin Laden.

The Dow Jones Industrial Average was down from session highs as it climbed 25 points, or 0.2%, to 12836 in midday trade, led by Alcoa, which gained 2.3% after Goldman Sachs upgraded its investment rating on the shares. Merck was also strong, again 1.3%. The Standard & Poor's 500 stock index gained 2 points to 1366, led by health-care stocks. The Nasdaq 100 declined one point to 2873.

A mixture of deal activity, Chrysler's first profitable earnings report since bankruptcy and traders' favorable reaction to bin Laden's elimination were helping buoy the market.

Among the deal news, Teva Pharmaceutical agreed to buy Cephalon for $6.8 billion, building its branded and specialty pharmaceuticals business. Cephalon shares rose 4.3% and Teva's American Depositary Shares climbed 2.6%.

Privately held Chrysler reported a small net profit as a result of rising vehicle sales, which some investors viewed as a significant milestone.

"[Chrysler] continues to prove that the industrial manufacturing sector in the United States is strengthening. That sector has been really in many ways the leading indicator throughout this recovery," Liz Miller, president of Summit Place Financial Advisors said.

Late Sunday evening, stock futures jumped with word that terrorist leader Osama bin Laden had been eliminated in a military operation announced by President Barack Obama. Oil also dropped as many investors concluded a chapter had been closed in the struggle against terrorism and in the Middle East's geopolitics.

But there is precedent for a modest market impact for the capture or death of figures with similar national-security import. Stocks initially gained after the capture of Saddam Hussein in 2003 but finished near the previous session's close, Bespoke Investment Group data showed.

Stocks tend to rise on the first trading session of the month as investors dive into the market. Monday's action follow the best month of the year so far for stocks. The Dow Jones Industrial Average tacked on 4% in April.

Among companies reporting earnings, Dish Network jumped 16% as the company's first-quarter profit more than doubled. Dish's litigation expense last year was supplanted by a $500 million credit, as the company settled its patent litigation with EchoStar and TiVo. EchoStar dropped 0.4% while TiVo gained 4.9%.

In deal news, Arch Coal agreed to acquire International Coal Group for $3.4 billion in a deal it said would make it the second-largest U.S. producer of coal used in steel production. International Coal shares jumped 31% and Arch Coal shed 0.9%.

Community Health Systems boosted its hostile takeover offer for Tenet Healthcare Corp. by 20%, the latest volley in a contentious fight over the company's ownership, though traders viewed the situation cautiously. Community Health's stock shed 0.8% and Tenet's dropped 2.9%.

Stocks kept their gains after a mixed batch of economic data. The U.S. manufacturing sector slowed a bit in April, though not as much as expected, while U.S. construction spending rose in March, following three straight declines.