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US stocks notch small gains; AT&T and DirecTV fall after announcing deal

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Major stock indexes notched small gains in afternoon trading Monday as investors monitored the latest developments in corporate mergers. Traders applauded an acquisition by Abbott Labs and sent shares in Pfizer higher, while AT&T and DirecTV fell.

KEEPING SCORE: The Standard & Poor's 500 index rose four points, or 0.3 per cent, to 1,882 as of 1:30 p.m. Eastern Time. The Dow Jones industrial average gained one point, or 0.01 per cent, to 16,492. The Nasdaq composite gained 28 points, or 0.7 per cent, to 4,119.

GETTING BIGGER: AT&T said late Sunday that it plans to buy satellite TV provider DirecTV for $48.5 billion. The proposed deal would create the second-largest pay TV operator behind a combined Comcast-Time Warner Cable. The proposal could face close scrutiny from the Federal Communications Commission and Department of Justice. AT&T fell 69 cents, or 1.9 per cent, to $36.05. DirectTV slid $1.22, or 1.4 per cent, to $84.96.

M&A TREND: The proposed AT&T-DirecTV combination comes amid a recent increase in mergers and acquisitions, noted Terry Sandven, chief equity strategist for U.S. Bank.

"Companies in general have increased levels of cash and that bodes well for dividends, share buybacks as well as acquisitions," Sandven said. "So we view this as a sign that the environment is favourable for equities."

NO, AGAIN: The board of AstraZeneca rejected a sweetened takeover offer from U.S. drugmaker Pfizer. Pfizer, which has been courting AstraZeneca since January, announced Sunday that it was ready to raise its stock-and-cash offer by 15 per cent to $118.8 billion. Pfizer rose 30 cents, or 1 per cent, to $29.41.

DEAL BOOST: Abbott Laboratories gained 43 cents, or 1.1 per cent, to $39.49 as financial analysts cheered the medical device maker's proposed acquisition of CFR Pharmaceuticals for nearly $3 billion.

TRANSPACIFIC PARTNERS: Johnson Controls jumped $1.77, or 4 per cent, to $46.55 on news the company is forming a joint venture with China-based Yanfeg Automotive Trim Systems that will create the world's largest maker of automotive interiors.

UNAPPETIZING RESULTS: Campbell Soup fell $1.32, or 2.9 per cent, to $43.80 after the food company reported earnings that fell short of Wall Street estimates. The company also lowered its full-year revenue outlook, noting that it was disappointed that soup sales failed to meet expectations.

SECTOR WATCH: Seven of the 10 industry sectors in the S&P 500 were trading higher, led by technology stocks. Travel reviews portal TripAdvisor topped all stocks in the S&P 500, gaining $3.72, or 4.5 per cent, to $85.88. Retailer Nordstrom posted the biggest decline, falling $2.12, or 3 per cent, to $68.43.

SMALL CAP RALLY: After strong gains last year, small-company stocks began losing ground in March as investors turned to larger stocks in a shift from seeking growth to emphasizing value. Monday's move in the Russell 2000 index, a proxy for small-company stocks, provided some market watchers encouragement that perhaps the small stocks are now seen as oversold, said Liz Ann Sonders, chief investment strategist at Charles Schwab.

"I'm not suggesting that one day's action is a tell, but some of these areas that have been most hard hit over the last month or two seem to be finding their legs," Sonders said.

The Russell 2000 was on pace to extended last week's gains. It was up seven points, or 0.7 per cent, to 1,110.

OTHER MARKETS: The yield on the 10-year U.S. Treasury note dipped to 2.51 per cent from 2.52 per cent late Friday. Gold rose 40 cents to $1,293.80 an ounce. Crude oil rose 66 cents to $102.24 a barrel.

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