Health stocks push market higher

NEW YORK (AP) — Investors moved back into stocks on hopes that an election in Massachusetts would weaken Senate Democrats and make it harder for President Barack Obama to make changes to health care.

The vote Tuesday to fill the seat of late Sen. Edward M. Kennedy will shift power in the Senate after Republican Scott Brown won. That gives Republicans the 41 votes necessary to block Democratic proposals, including the health-care bill.

The prospect of a logjam in Washington over health care eased concerns that profits at companies such as insurers and drug makers would suffer. Rising health stocks pulled the broader market higher.

The Dow Jones industrial average rose 116 points to a 15-month high after sliding 101 on Friday. Broader indexes also rose, and demand for the safety of government debt waned.

Meanwhile, Kraft Foods Inc.’s agreement to acquire Cadbury PLC for $19.5 billion boosted hopes that corporate dealmaking will continue to rebound. Investors see buyouts as a sign of confidence in the economy.

Technology stocks got a boost after a Credit Suisse analyst raised his rating on Ciena Corp., a maker of telecommunications equipment, predicting that revenue would exceed expectations.

Shares of tech companies will draw more attention today after IBM Corp. reported a 9 percent increase in earnings for the final three months of 2009. The company said after the closing bell Tuesday that its revenue rose for the first time in a year and a half. IBM also predicted that its 2010 earnings will come in at the high end of its previous forecast.

Tuesday’s gains came after stocks fell Friday when JPMorgan Chase & Co.’s quarterly results fell short of expectations. U.S. markets were closed Monday for Martin Luther King Jr. Day.

Analysts said that beyond a possible shift in plans for health care, the week’s earnings reports will help chart the market’s course in the coming months as companies update their expectations for the economy.

The stock market has been climbing for 10 months on hopes that an easing recession would boost corporate profits. But lingering problems such as high unemployment and a weak housing market have raised questions about whether the jump in stocks is premature.

“This is just a critical period when we get to see the litmus test of earnings and then guidance,” said Philip S. Dow, managing director of equity strategy at RBC Wealth Management in Minneapolis.

According to preliminary calculations, the Dow rose 115.78, or 1.1 percent, to 10,725.43. The broader Standard & Poor’s 500 index rose 14.20, or 1.3 percent, to 1,150.23. It was the highest close for the Dow and the S&P 500 index since Oct. 1, 2008.

The Nasdaq composite index rose 32.41, or 1.4 percent, to 2,320.40.

Brett Hryb, a portfolio manager with MFC Global Investment Management in Toronto, said a defeat of the health bill could help some companies but that Brown’s win would not necessarily make that certain.

“It’s not a slam dunk by any means,” he said.

Among health stocks, insurers Aetna Inc. rose $1.30, or 4.2 percent, to $32.66 and UnitedHealth Group Inc. rose $1.38, or 4.1 percent, to $35.13. Pharmaceutical company Pfizer Inc. advanced 51 cents, or 2.6 percent, to $20.

Shares of Cadbury rose $3.19, or 6.2 percent, to $55.09. Kraft slipped 17 cents, or 0.6 percent, to $29.41.

Ciena jumped $1.28, or 11 percent, to $12.91.

Citigroup Inc. rose 12 cents, or 3.5 percent, to $3.54 after reporting a fourth-quarter loss of $7.6 billion mostly tied to repayment of $20 billion in government bailout money. The company said it is starting to see some stabilizing in the number of mortgage and credit-card loans that are past due.