Wall Street welcomes merger talk

Stocks rise as investors eye deal news and rumors, including the latest on the Microsoft-Yahoo potential merger.

NEW YORK (CNNMoney.com) -- Stocks struggled higher Monday morning as a spate of deal talk encouraged investors, including the latest in the potential Microsoft-Yahoo combination and a possible $5 billion investment for mortgage lender Washington Mutual.

However, gains were limited by spiking oil, gold and gas prices.

The Dow Jones industrial average (INDU) had added 0.2%, over an hour into the session. The broader Standard & Poor's 500 (SPX) index had gained 0.4% and the Nasdaq composite (COMP) rose 0.2%.

The major gauges posted bigger gains at the open, before scaling back a bit.

Microsoft (MSFT, Fortune 500) said over the weekend that Yahoo (YHOO, Fortune 500) has three weeks to agree to a takeover or face a proxy fight for control of the company. On Monday, Yahoo said it isn't opposed to a deal, but wants a better offer than the current $41 billion.

Swiss drugmaker Novartis (NVS) is buying 25% of Alcon (ACL) with an option to buy more than 75% of the eye-care company in a deal that could be worth as much as $38 billion.

Washington Mutual (WM, Fortune 500) is in talks to receive a $5 billion investment from private equity firm TPG and other investors, the Wall Street Journal reported.

Stocks were mixed Friday - at the end of a strong week - as the dismal March jobs report vied with hopes that the worst may be over for the market.

The first-quarter earnings reporting period starts after the close of trade Monday when Dow component Alcoa (AA, Fortune 500) reports earnings. Earnings for the overall S&P 500 are expected to decline versus a year ago, due largely to a big drop in financial sector results amid the credit and housing market crises.

Commodity prices. U.S. light crude oil for May delivery rose $2.72 to $108.95 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $16.80 to $930 an ounce.

Other markets. The dollar rose versus the euro and the yen.

Treasury prices slumped, raising the yield on the benchmark 10-year note to 3.53% from 3.58% late Thursday. Bond prices and yields move in opposite directions.
First Published: April 7, 2008: 9:36 AM EDT