Caterpillar profits fuel Wall St gains

US stocks rose yesterday as a flurry of merger activity and strong earnings from Caterpillar boosted investor sentiment and kept the three-week rally intact.

Equities have risen on hopes a resolution to Europe’s sovereign debt crisis is on the horizon and a reduced likelihood of a US recession after stronger-than-expected corporate results and economic data.

Adding to the positive tone was a batch of M&A activity in the health care and technology sectors involving deals totalling more than $5bn.

Caterpillar jumped five per cent to $91.77 to lead the Dow higher after the world’s largest heavy equipment maker reported a 44 per cent jump in quarterly profit on record revenues.

“The market is completely convinced at the moment that Europe is going to be successful with a plan that the market is going to like -- that they think is credible -- clearly,” said Ken Polcari, managing director at ICAP Equities in New York.

“The other thing is this week is a big, big week in terms of mining names, energy names, industrial names . We’ve gotten some good forecasts going forward, so as long as all that holds, that is what is fueling this fire.”

The Dow Jones industrial average advanced 0.89 per cent to 11,913.62. The Standard & Poor’s 500 Index rose 1.29 per cent, to 1,254.20. The Nasdaq Composite Index gained 2.35 per cent, to 2,699.44.

The gains put the S&P 500 up nearly 11 per cent for the month, putting the benchmark index on track for its best monthly performance since December 1991.

The recent rally has pushed the broad index to the top of its trading range between 1,230 and 1,250 where it has struggled to advance due to conflicting headlines from Europe.

Even though earnings fueled gains, solving Europe’s debt crisis will be crucial to further gains. Light volume suggested investors would remain cautious until the details of the euro zone plan were known.

“We remain within that trading range and this week is going to be chock full of these earnings. Like Caterpillar today was a very strong number, so if we continue to get that this week, don’t be surprised to see the market go there,” said Polcari.

Oracle Corp said it would acquire RightNow Technologies, which provides cloud-based customer services software, for about $1.5bn, or $43 per share. RightNow surged 19.4 per cent to $42.94 while Oracle added 2.3 per cent to $32.87.