Stocks Advance on Lower Oil, Deal News

A fall in crude prices Monday helped ease inflation fears. Hewlett-Packard was reportedly close to a deal to buy EDS

by David Bogoslaw

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Stocks closed solidly higher Monday, bolstered by a pullback in oil prices and a press report that said Hewlett-Packard (HPQ) was close to a deal to buy Electronic Data Systems (EDS). Shares of EDS jumped nearly 28% before being halted for pending news.

On Monday, the Dow Jones industrial average finished higher by 130.43 points, or 1.02%, at 12,876.31. The broader S&P 500 index added 15.30 points, or 1.10%, to close at 1,403.58. The tech-heavy Nasdaq composite index gained 42.97 points, or 1.76%, to end the session at 2,488.49.

On the New York Stock Exchange, 22 stocks were higher in price for every nine that declined. The ratio on the Nasdaq was 20-9 positive.

Transportation and retail stocks were among biggest beneficiaries of the lower oil prices. Retailers also got a boost from a raised first-quarter earnings forecast by AnnTaylor (ANN), which preceded Wal-Mart’s (WMT) first-quarter report due Tuesday.

Financials rose with the help of better-than expected earnings news from HSBC (HBC) and MBIA (MBI). Another major gainer was Research In Motion (RIMM) after the company unveiled a new Blackberry and new investment

pact.

On the downside, Cumulus Media (CMLS) was sharply lower after announcing an investor group's termination of its merger agreement.

Treasuries ended marginally higher in price. Gold fell, while the dollar index was off slightly.

On Monday, oil prices declined after a series of record highs last week due to concerns that high prices will curb demand. Bloomberg News reported a decline China's oil imports in April as crude costs prompted refiners in the world's second-largest energy-consuming country to cut demand. Industrial production in India grew at the slowest pace since 2002, according to government data. Meanwhile, a stronger dollar against the euro is limiting oil's appeal as a currency hedge, Bloomberg said.

On the NYMEX, crude oil for June delivery was $1.73 lower at $124.23 per barrel.

In a speech on the U.S. economic outlook Monday, Chicago Federal Reserve Bank President Charles Evans said monetary policy was accommodative and supportive of growth, with the inflation-adjusted Fed funds rate "close to zero or slightly negative." He sees growth risks skewed to the downside and inflation risks to the upside.

According to a Wall Street Journal report, Hewlett-Packard was close to a deal to acquire EDS for between $12 billion and $13 billion, citing people familiar with the mater. The terms of the deal were not immediately clear but an announcement was expected as early as Tuesday, the Journal sources said.

Research in Motion (RIMM) was trading higher on news that the company, Thomson Reuters, and the Royal Bank of Canada will launch BlackBerry Partners Fund, a $150 million venture capital fund, to invest in mobile applications, services for the BlackBerry platform, and other mobile platforms. The company also introduced the Blackberry Bold Smartphone and signed a deal with Microsoft (MSFT) that will give BlackBerry Smartphone customers easy mobile access to Windows Live Messenger and an enhanced level of integration between Windows Live Hotmail and the BlackBerry platform.

The new batch of economic data starts Tuesday with a reports on import prices, retail sales and business inventories, all of which will be watched closely for further clues to the state the economy. Inflation-watchers are waiting for Wednesday's consumer price data.