NEW YORK (AP) — Energy companies led U.S. stocks higher Tuesday as investors hoped higher oil prices and bigger profits are on the way.
News of two deals in the energy sector also helped send those stocks higher as traders anticipated that more consolidation could follow. Spectra Energy agreed to be acquired for $28 billion and Yates Petroleum said it would be bought for $2.3 billion.
"What's driving the stocks today is a view that some consolidation might take some costs out and drive up profits," said Jim McDonald, chief investment strategist for Northern Trust.
The Dow Jones industrial average gained 46.16 points, or 0.2 percent, to 18,538.12. The Standard & Poor's 500 index rose 6.50 points, or 0.3 percent, to 2,186.48. The Nasdaq composite added 26.01 points, or 0.5 percent, to close at 5,275.91, an all-time high.
Investors were once again getting their hopes up for an agreement among oil producing countries to reduce output and mitigate a supply glut that has knocked oil prices lower.
On Tuesday Iran's oil minister said his country would support an effort by OPEC to stabilize the oil market. Because Iran is boosting its oil production after years of sanctions, it has opposed efforts to limit oil production.
Oil prices didn't change much on the day. Benchmark U.S. crude oil added 39 cents to $44.83 a barrel in New York. Brent crude, the benchmark for international oil prices, lost 37 cents to $47.26 a barrel in London.
The market wobbled in the morning after a survey was released showing a sharp slowdown in the U.S. service sector last month. That helped send shares of consumer companies and banks lower. It also sent prices for precious metals, bonds, and high-yielding utility and phone company stocks higher.
"Just when people think the U.S. economy is starting to regain some strength, you get hit with a report like this," McDonald said.
The Institute for Supply Management said U.S. service companies grew at a far slower pace in August than they had in July. While service firms have expanded every month six and a half years, the ISM reported its weakest service industry reading since February 2010. New orders and hiring grew at a slower rate and exports fell. Service firms accounted for almost all of U.S. job creation last month.
Some of the biggest gains went to utility and phone companies, traditional safe-play stocks. Investors also snapped up government bonds, sending prices higher and yields lower. That echoed a pattern seen when the market was plunging early this year. AES added 61 cents, or 5 percent, to $12.84 and NextEra Energy rose $2.16, or 1.8 percent, to $125.29.
The yield on the 10-year Treasury note declined to 1.53 percent from 1.61 percent late Friday. The dollar sank to 102.08 yen from 103.94 yen Friday. The euro rose to $1.1253 from $1.1159.
Metals priced jumped. Gold gained $27.30, or 2.1 percent, to $1,354 an ounce. Silver rose 77 cents, or 4 percent, to $20.14 an ounce. Copper picked up 1 cent to $2.09 a pound.
Deal talks and news spread beyond the energy sector. German health care and chemicals conglomerate Bayer raised its offer for Monsanto to $127.50 a share. The latest offer values Monsanto at around $55.8 billion. Monsanto has already rejected two bids from Bayer, and its stock remains far below the price of Bayer's bid. It fell $1.37, or 1.3 percent, to $106.07 Tuesday.
Industrial and medical device company Danaher will buy molecular diagnostics company Cepheid for $53 per share, or about $4 billion. Cepheid climbed $18.11, or 52.6 percent, to $52.53 while Danaher dipped $1.69, or 2.1 percent, to $79.50.
Bus, truck and engine maker Navistar surged after it announced an investment from a unit of Volkswagen. The companies are also creating a joint venture that will help source parts for each of them, and they will share technology. Volkswagen Truck & Bus also name two directors to Navistar's board, and Navistar said Tuesday that Chairman James Keyes will retire.
Navistar rose $5.72, or 40.7 percent, to $19.79, far above the $15.76 a share Volkswagen Truck & Bus is paying. Rival engine maker Cummins lost $9.22, or 7.3 percent, to $116.94.
A pair of U.S.-based 3-D printing companies traded higher after General Electric made a big bet on the industry. GE agreed to spend $1.4 billion to buy two European 3-D competitors. 3-D Systems Corp. rose 83 cents, or 5.6 percent, to $15.75 and Stratasys added 83 cents, or 3.8 percent, to $22.76. GE lost 24 cents to $31.05, which helped pull industrial stocks lower.
In other energy trading, wholesale gasoline rose 1 cent to $1.32 a gallon. Heating oil remained at $1.41 a gallon. Natural gas skidded 8 cents to $2.72 per 1,000 cubic feet.
France's CAC 40 lost 0.2 percent while in Germany the DAX gained 0.1 percent. Britain's FTSE 100 shed 1 percent. The Nikkei 225 index in Japan rose 0.3 percent and in South Korea, the Kospi added 0.3 percent. Hong Kong's Hang Seng advanced 0.6 percent.