Stocks rose on Thursday, helped by optimism about a major deal in the chemicals sector and after the Federal Reserve chairman said the central bank and the government are focused on stabilizing the financial system.
Dow Chemical's $15.3 billion bid for Rohm and Haas (ROH.N) gave investors confidence that there was value in the sector. Rohm and Haas stock soared 64 percent and was one of the top advancers in the S&P 500.
Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson told Congress they were doing everything possible to restore calm to financial markets, but stressed to lawmakers that a longer-term regulatory overhaul was vital to avert future crises.
Alcoa (AA.N) helped drive the Dow upward after aluminum prices hit an all-time high on output cuts in top producer China. Apple's (AAPL.O) stock rose, lifting the Nasdaq, a day before it is set to launch the latest version of its popular iPhone.
But a $5.60 jump in the price of oil amid threats to production in Nigeria and Brazil and an additional missile test by Iran kept the stock market's gains in check. The higher oil prices raised concerns about consumer spending and corporate profits, hurting sectors from retailers to automakers.
"Bernanke and Paulson are, in essence, trying to calm the market," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.
The Dow Jones industrial average (.DJI) rose 81.58 points, or 0.73 percent, to 11,229.02, while the Standard & Poor's 500 Index (.SPX) gained 8.70 points, or 0.70 percent, to 1,253.39. The Nasdaq Composite Index (.IXIC) was up 22.96 points, or 1.03 percent, to close at 2,257.85.
The gains came a day after the S&P 500 joined the Dow industrials and the Nasdaq in a bear market.
But financial stocks were under pressure again on concerns that the sector may need additional capital to withstand the ongoing credit crisis. Shares of the top two U.S. mortgage finance companies Freddie Mac (FRE.N) and Fannie Mae (FNM.N) were the hardest hit by those fears. Freddie Mac dropped 22 percent to $8 and Fannie Mae lost 13.8 percent to $13.20.
Lehman Brothers (LEH.N) stock slid 12.4 percent to $17.30, but closed off its session low at $15.73. Pimco, the world's biggest bond fund, said it continued to trade normally with Lehman Brothers, as rumors that it had pulled business away from the investment bank clobbered Lehman's shares.
In the latest snapshot of the U.S. economy, June retail sales figures sounded a positive note. Summer weather, aggressive promotions and tax rebates sent many U.S. consumers shopping in June, giving retailers struggling in the weak economy their strongest month in more than a year.
Despite the overall good news, the Standard & Poor's Retail Index (.RLX) fell 3.2 percent as investors, who were expecting a sales boost from the tax rebates, worried about its fleeting nature, said Joseph Feldman, a retail analyst with Telsey Advisory Group.
The jump in oil prices further weighed on the retail sector.
Shares of automakers fell, with General Motors (GM.N) down 6.2 percent at $9.69. Airlines also suffered, with an airline index (.XAL) down 1.5 percent.
Alcoa shares rose 9.7 percent to $34.60 on the New York Stock Exchange.
Energy companies' shares climbed, with Exxon Mobil (XOM.N) gaining 2.1 percent to $86.06. U.S. crude oil gained $5.60 to settle at $141.65 a barrel, reflecting investors' nervousness about Iran's missile tests and supply concerns related to Nigeria and Brazil.
In the day's major acquisition, Dow Chemical shares fell 4.2 percent, while Rohm & Haas rose 64.2 percent to $73.62. Dow Chemical's bid to buy Rohm & Haas is valued at $15.3 billion; including Rohm & Haas debt, the deal size rises to $18.8 billion.
Apple shares gained 1.4 percent to $176.63 on the Nasdaq, while shares of AT&T (T.N),the exclusive carrier for the iPhone in the United States, jumped 2 percent to $32.77 on the NYSE.
Apple's new iPhone is expected to attract hordes of buyers when it goes on sale on Friday in more than 20 countries, helping Apple handily beat its target to sell 10 million of them by the end of 2008.
Trading was moderate on the NYSE, where about 1.53 billion shares changed hands, below last year's estimated daily average of 1.90 billion, while on the Nasdaq, about 2.30 billion shares traded, above last year's daily average of 2.17 billion.
Advancers outnumbered decliners on the NYSE by 16 to 15, while on the Nasdaq, about four stocks rose for every three that fell.
(Editing by Jan Paschal)
