The Dow Jones industrial average notched a three-day win streak Monday for the first time in six weeks. A $19 billion corporate buying spree and encouraging economic news from Japan sent the Dow up 213 points and erased its losses from last week.
The return of what's called "Merger Monday" on Wall Street made investors more optimistic about the future. So did a report that Japan's economy shrank less than feared after the earthquake and tsunami there on March 11. That helped ease worries that the U.S. economy may slide into another recession.
The Dow rose 213.88 points, or 1.9 percent, to 11,482.90. It has gained 763 points since Thursday. That's the best three-day point gain since it rose 927 in November 2008, during the depths of the financial crisis. The Dow is up 7.1 percent over the three days, the biggest percentage gain since it rose 9.5 percent the first three days of the bull market in March 2009.
The Standard & Poor's 500 index rose 25.68, or 2.2 percent, to 1,204.49. The Nasdaq composite index rose 47.22, or 1.9 percent, to 2,555.20.
Markets may have stabilized the last three days, but financial analysts warned investors not to assume that stocks have fully settled down after last week's swings.
The Dow rose or fell last week by at least 400 points in four straight days for the first time. The first downgrade of the U.S. credit rating triggered the volatility. It was worsened by concerns that Europe's debt problems are worsening and that the U.S. economy is weakening.
"You might have these moments of quiet, but the debt crisis in Europe did not go away," said John Hailer, Natixis Global Asset Management's chief executive for the U.S. and Asia. "Our issues with the debt, with what our tax policy is going to be going forward, our unemployment did not go away.
"We are probably going to have to look at some very different levels of volatility than what a lot of investors grew up with over the last 25 to 30 years," he said.
A period of relative stability has been common in past volatile markets. In 2008, stocks plunged between mid-September and mid-November. From mid-November until the beginning of January 2009, the Dow was in a lull of sorts. It ratcheted up and down, mostly in the high 8,000 range. But in early January 2009, it began to plunge again and finally hit bottom at 6,547 on March 9, 2009.
Despite its three-day gain, the Dow remains down 9.8 percent since its most recent high on July 21 and down 10.4 percent since its 2011 high set on April 29.
More swings could come this week. Leaders of France and Germany meet today to discuss Europe's debt problems. Spain and other countries have borrowed so much that they may need help to repay their bills.
Corporate deals dominated the news, as companies followed a years-long practice of announcing acquisitions on a Monday. The biggest was Google Inc.'s $12.5 billion cash purchase of wireless phone maker Motorola Mobility Holdings. It is the biggest acquisition in Google's history. Motorola Mobility's stock jumped percent 55.8 percent. Google fell 1.2 percent.
Also, Time Warner Cable said it will pay $3 billion in cash for Insight Communications Co., which has more than 750,000 cable customers in the Midwest.
Companies across the United States have accumulated a record amount of cash since the recession ended. They have increased their cash reserves every quarter for more than two years. Those in the S&P 500 index had a total of $963.3 billion at the end of March.
Investors have been waiting for companies to use some of that cash on acquisitions, dividend increases and stock buybacks. Many market strategists believe that companies are more confident about the future if they're willing to buy other businesses. So a series of acquisition announcements tends to send stocks higher.
The growing cash hoard has been the result of strong profits. Companies have kept costs low by being slow to hire. Revenue, meanwhile, is growing, particularly from overseas customers.