Stocks advance on M&A with further gains seen

Merger activity drove the Dow and S&P to two-and-a-half-year highs on Monday in the latest in a series of mileposts that point to more gains ahead.

Buying accelerated after the S&P 500 broke through the 1,313 mark, taking the index further into levels that prevailed before the financial crisis. More than two stocks rose for every one that fell on both the New York Stock Exchange and Nasdaq, but the day's rise came on lighter-than-average volume.

Diversified industrial company Danaher Corp (NYSE:DHR - News) agreed to buy medical diagnostics company Beckman Coulter Inc (NYSE:BEC - News) for about $6.8 billion. Oil driller EnsCo Plc (NYSE:ESV - News) said it would buy Pride International Inc (NYSE:PDE - News) for about $7.3 billion.

"The size of these deals is an indication that the buyers feel comfortable putting that cash to work while the companies being bought are undervalued," said James Dunigan, chief investment officer at PNC Wealth Management in Philadelphia, which oversees $105 billion.

"The level of the broader market is reasonable, but there are these individual situations that deserve a higher premium than the market is getting over all." (more)