Wall Street rises on tech M&A, rebalancing of index

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NEW YORK (Reuters) – Stocks rose on Tuesday, led by tech shares after the proposed merger of two major semiconductor companies and an updating of a key Nasdaq index attracted buyers to the sector.

Investors will scour the minutes from the latest meeting of the Federal Reserve’s policy-setting committee, expected at 2 p.m. for insight into officials’ views on rising commodity prices and the economic outlook.

Fed Chairman Ben Bernanke said on Monday the price rises were unlikely to persist.

A rebalancing of the Nasdaq 100 (.NDX), which takes effect on May 2, spurred traders to buy companies with increased weightings, including Microsoft Corp (MSFT.O), Intel Corp (INTC.O) and Cisco Systems Inc (CSCO.O), all of which rose more than 1 percent and were the top three percentage gainers in the Dow.

Apple Inc’s (AAPL.O) weighting was slashed, though it remains the biggest component. The stock was flat after earlier falling as much as 1.5 percent.

Texas Instruments (TXN.N) late Monday offered to buy National Semiconductor (NSM.N) in a deal worth $6.5 billion, a premium of 78 percent. National Semi shares jumped 71.5 percent to $24.13. Texas Instruments added 2 percent to $34.80.

«Tech stocks are leading this big wave of merger and acquisition activity, which people are trying to position themselves ahead of and which I expect to continue,» said James Swanson, chief investment strategist at Boston-based MFS Investment Management, which oversees about $200 billion.

The deal is the latest in a string of multibillion-dollar deals that have helped pushed stocks higher in recent weeks. The Dow closed on Monday at its highest level since June 2008, though volume was the lowest of the year.

«This is a powerful cycle that is setting the stage for further gains as we go into earnings season,» Swanson said.

The Dow Jones industrial average (.DJI) was up 27.10 points, or 0.22 percent, at 12,427.13. The Standard & Poor’s 500 Index (.SPX) was up 4.22 points, or 0.32 percent, at 1,337.09. The Nasdaq Composite Index (.IXIC) was up 15.16 points, or 0.54 percent, at 2,804.35.

The S&P 500 rose above 1,333, a closely watched level that is double the low it reached in the financial crisis. It hasn’t ended above that level since mid-February, and the recent light volume has raised questions about the durability of the rally.

China’s central bank increased interest rates on Tuesday for the fourth time since October, raising suspicions that data next week may show higher inflation than expected in March.

In the latest snapshot of the U.S. economy, the Institute for Supply Management showed the vast U.S. services sector grew more slowly in March than it did in February.

KB Home (KBH.N) shares dropped 2.7 percent to $11.87 after it reported a first-quarter loss that widened from the previous year, hurt by a fall in net orders.

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