Monday's late afternoon trade: US indices climb as M&A buzz boosts financials

US stocks rose sharply on Monday on a steady flow of merger-and-acquisition chatter, including talk that Britain's Barclays Plc was eyeing Dutch bank ABN AMRO, overshadowing the recent turmoil in the subprime mortgage market.
Analysts said investors took the burst of deal news as a sign of optimism about the prospects for growth in both corporate profits and the US economy.
Shares of J. P Morgan Chase & Co, the No 3 US bank, rose 1.2 percent to $47.59 on the prospects of the international banking deal in the works in Europe. Bank of America Corp shares also ranked among the session's biggest advancers, up 1.8 percent at $50.29.
"The M&A activity is definitely helping a bit. It's broad in terms of the rally. Finance is bouncing back nicely, and that was a group that really took it on the chin," said Owen Fitzpatrick, head of the US Equity Group at Deutsche Bank Private Wealth Management in New York.
The Dow Jones industrial average was up 120.81 points, or 1.00 percent, at 12,231.22. The Standard & Poor's 500 Index was up 15.74 points, or 1.13 percent, at 1,402.69. The Nasdaq Composite Index was up 22.13 points, or 0.93 percent, at 2,394.79.
Investors snapped up shares of industrial bellwethers such as Caterpillar Inc, betting that the Federal Reserve would not want to risk plunging the economy into a sharp slowdown by raising interest rates amid a faltering housing market. Caterpillar shares rose 2.2 percent to $64.54 and was the top-weighted gainer on the Dow.
The Fed's policy-making group starts a two-day meeting on Tuesday. Financial markets expect the US central bank to leave the benchmark federal funds rate unchanged at 5.25 percent. Investors will focus on the wording of the Fed's announcement on monetary policy and an accompanying statement on the economic outlook, both expected on Wednesday.
Even though investors seemed to worry less about the possibility of subprime mortgage market worries cascading into other sectors of the economy, shares of companies in that sector, which extends home loans to borrowers with poor credit histories, remained lower.
Accredited Home Lenders Holding Co fell 12.7 percent to $9.51 on the Nasdaq after the company said it still had not landed a financing deal to boost its liquidity.
Shares of oil and drilling services company Todco rose 20.9 percent to $39.66 after Hercules Offshore Inc said it agreed to buy the company for $2.3 billion.
The Blackstone Group, along with The Carlyle Group and Riverstone Holdings, are mulling a rival offer for TXU Corp, a source familiar with the situation said on Sunday. That could scupper a record-breaking $32 billion bid for the Texas power company from competing buyout firms. TXU shares were up 1.5 percent at $63.69 on the NYSE.