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Stocks finished higher as investors returning from a three-day holiday weekend were cheered by deal news, including a $95.5 billion offer for Dutch bank ABN Amro. However, overall action remained fairly muted with many participants still away after the weekend. The tech rally propelled the Nasdaq and kept the Dow industrials afloat at the end of a choppy session influenced by deals, lower oil prices, stronger consumer confidence and news that China is looking to cool its booming stock market.

Today, the Dow Jones industrial average closed up 14.06 or 0.10% to 13,521.34, the broader S&P 500 index closed up 2.38 or 0.16% to 1,518.11, and the tech-fueled Nasdaq composite closed up 14.87 or 0.58% to 2,572.06.

Market breadth was positive. On the New York Stock Exchange, winners beat losers 20 to 11 on volume of 1.4 billion shares. On the Nasdaq, advancers topped decliners 19 to 10 on volume of 1.6 billion shares.

Stocks reacted to news that China has raised the tax on share trades in Chinese markets, a move seen as an attempt to slow the booming Chinese equity market, which is already up more than 60% this year. China increased the stamp tax on securities trading to 0.3% from 0.1%, according to the official Xinhua News Agency. Should the higher tax trigger another sell-off in Chinese markets, that could again spread to U.S. markets.

In economic news, consumer confidence rose to 108 in May from an upwardly revised 106.3 in April, topping forecasts. The report suggested that consumers set aside worries about higher gas prices and instead focused on the strong stock and labor markets. Reports on manufacturing, inflation, manufacturing and the labor market are due later in the week.

A consortium led by Royal Bank of Scotland has launched a $95.7 billion bid for Dutch group ABN AMRO, trumping Britain’s Barclays in a battle for the world’s biggest bank takeover. This could pressure Barclays to raise its all-share offer.

Shares of Archstone closed up $5.53 or 10% to $60.76, on news that Trshman Speyer Properties and Lehman Brothers are buying that for $22.2 billion, including the assumption of debt. Archstone shareholders will receive $60.75 per share, a 22.7% premium over the share price on May 24, before reports about a possible deal were first published. Archstone’s board of trustees unanimously approved the deal and the completion of the transaction, is expected in the third quarter.

Amongst some of the deals, shares of Bradley Pharmaceuticals jumped more than 20% after its chief executive bid to take the company private for $21.50 a share, a 17% premium over its Friday closing price. Stock of Avaya gained over 15% following news reports that some private equity firms would like to buy it. Shares of URS Corp. climbed as it agreed to buy engineering and design company Washington Group in a stock-and-cash deal worth $2.6 billion.

U.S. light crude oil for July delivery sank $2.05 to $63.15 a barrel on the New York Mercantile Exchange, as supply concerns waned. Nigerian oil workers have called off a strike and several refineries, including three in the Gulf Coast, are coming back on line.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter