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Markets extended their stay in the positive zone boosted by merger and acquisition news, strong corporate earnings and hopes of progress being made during the European Council meeting held over the weekend. An eventful day for the Nasdaq saw it outpace fellow benchmarks as it moved back into the positive zone for the year. The tech-laden index also logged its best close since August 1, 2011.


The Dow Jones Industrial Average (DJIA) jumped 0.9% and settled at 11,913.62. The Standard & Poor 500 (S&P 500) gained 1.3% and finished the day at 1,254.20. The tech-laden Nasdaq Composite Index surged 2.4% and closed the opening day of the week at 2,699.44. The fear-gauge CBOE Volatility Index (VIX) reflected easing tension among investors, dropping below 30. However, volumes remained weak, similar to Friday’s situation, with consolidated volumes on the New York Stock Exchange, Amex and Nasdaq clocking in at 7.87 billion shares, below the daily average of 8.01 billion. On the NYSE, the advance decline ratio was 2,489 to 528.


Of the 30 Dow components, seven were on the losing side while Caterpillar Inc. (NYSE:CAT) with gains of 5.0% was the leader among the 23 stocks that finished in the green. Caterpillar’s gains helped the blue-chip index further strengthen its position in the green zone for the year and also aided the broader rally. Caterpillar’s earnings for the third quarter came in at $1.71 per share, topping estimates and the company also posted record revenues. In addition, the heavy-equipment maker also provided upbeat guidance and boosted sentiment by ruling out any impending global recession.


Investors also drew optimism from mergers and acquisitions news. Oracle Corp. (NASDAQ:ORCL) announced that it would acquire cloud-based customer services software provider Rightnow Technologies Inc. (NASDAQ:RNOW) for $1.5 billion, or $43 per share. Stocks of these companies jumped 2.3% and 19.4%, respectively. Meanwhile, the Wall Street Journal reported that Google Inc. (NASDAQ:GOOG) has been in talks with private-equity firms “about potentially helping them finance a deal to buy” Yahoo! Inc. (NASDAQ:YHOO). The stocks jumped 1.0% and 3.7%, respectively.


Separately, CIGNA Corporation (NYSE:CI) will be buying HealthSpring Inc. (NYSE:HS) for $3.8 billion, or $55 per share in cash. These stocks were up 1.4% and 33.7%, respectively. The J. M. Smucker Company (NYSE:SJM) bought the majority of Sara Lee Corp.’s (NYSE:SLE) North American food-service coffee and tea operations for $350 million in cash. While J. M. Smucker’s shares climbed 0.7%, Sara Lee dropped 0.7%. Amid this round of M&A news, Juniper Networks, Inc.’s (NYSE:JNPR) top executive said that the company is considering acquisitions in Asia and shares of the company consequently jumped 6.5%.


Investors are also closely watching developments from the European continent. The region’s leaders met at the European Council summit over the weekend and will take their final decision on Wednesday, while they have already concluded an agreement to recapitalize banks. Last week, the markets had closed on Friday drawing optimism from progress on debt crisis negotiations. French President Nicolas Sarkozy and German Chancellor Angela Merkel had added to the optimism late on Thursday by providing assurances that the elements of a ‘comprehensive plan’ will be discussed during the meeting and these will be implemented on Wednesday. Earlier, in a joint statement, the French and German leaders reassured investors that two meetings will be conducted, instead of just one, and the decision is the next development is therefore impending on Wednesday, when the leaders meet for their next meeting.


However, some of the optimism faded after Netflix, Inc. (NASDAQ:NFLX) reported that its subscriber base declined by 810,000 in the third quarter compared with the second quarter. The company’s better-than-expected quarter results was of little help as it also said that it expects further decline in DVD subscribers in this quarter. Additionally, expansion into Ireland and Britain is expected to drag the quarter results for the first quarter into the red zone. The company’s shares were up 1.5% during the trading session, but plummeted 27.8% after the closing bell.


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