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Stock prices rose modestly despite slow economic recovery

Stock prices rose modestly Monday as investors tentatively moved back into the market after a fresh round of merger and acquisition activity.

By Stephen BernardAssociated Press / August 23, 2010

In this Aug. 19 photo, traders work on the floor of the New York Stock Exchange, in New York. Stock prices rose moderately on Monday, despite worries about the pace of economic recovery.

Henny Ray Abrams/AP

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New York

Stock futures rose modestly Monday as investors tentatively moved back into the market after a fresh round of merger and acquisition activity.

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There are no major economic reports due out Monday that could provide insight into the pace of recovery. Stocks dropped late last week after fresh economic data renewed worries about the economy.

Mergers and acquisitions, however, could be giving the market a lift in the absence of new economic reports. Potential acquisitions are a sign companies are confident the economy will grow and business will improve in the coming quarters.

Hewlett-Packard Co. offered $24 per share for 3Par Inc. a week after rival Dell Inc. agreed to buy the data storage provider for $18 a share. Potash Corp. of Saskatchewan Inc. formally rejected BHP Billiton's $38.5 billion offer to acquire the fertilizer company.

European markets rose, due in part to news that HSBC Holdings PLC is in talks to buy a controlling stake in Nedbank Group Ltd. of South Africa from Old Mutual PLC for as much as $6.8 billion.

U.S. economic reports later this week will be closely watched to see if they can break a run of disappointing numbers. Many reports recently have shown growth is slowing in the domestic economy. That has reignited worries that the U.S. economy could fall back into a recession and curb a global recovery.

Last Thursday's report on weekly claims for unemployment benefits was particularly troubling because claims jumped to their highest level since November. That sparked a two-day sell-off in stocks to end the week.

High unemployment remains the biggest obstacle to a stronger recovery. Analysts widely believe, though, that high unemployment will remain for a while because companies are still tentative about economic growth and unsure about potential increases in taxes and costs from health care reform passed earlier this year.

Ahead of the opening bell, Dow Jones industrial average futures rose 41, or 0.4 percent, to 10,243. Standard & Poor's 500 index futures rose 5.70, or 0.5 percent, to 1,076.00, while Nasdaq 100 index futures rose 12.50, or 0.7 percent, to 1,838.00.

Bond prices dipped slightly. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.63 percent from 2.62 percent late Friday. Its yield is often used to set interest rates on mortgages and consumer loans.

Investors will get data on the housing market, durable goods orders, consumer sentiment and a revision to the second-quarter gross domestic product later this week.

The housing market remains weak, particularly after the expiration of the government's tax credit earlier this year. Reports on existing and new home sales are due out Tuesday and Wednesday respectively.

Wednesday's durable goods order will be eyed for signs that a slowdown in manufacturing was only temporary. A regional manufacturing report Thursday about the Mid-Atlantic region showed activity shrank, spooking investors. Manufacturing had shown the most consistent growth throughout the year.

On Friday, investors will get a revision to the GDP estimate, which is the broadest measure of the nation's economic output. With recent data showing a further slowdown, second-quarter growth was likely not as strong as first thought.

The University of Michigan also reports its second reading on consumer sentiment for the month.

Hewlett-Packard shares fell 26 cents to $39.59 in pre-opening trading, while 3Par rose $6.70, or 37.1 percent, to $24.74. Dell rose 7 cents to $12.14. Potash rose $1.83 to $151.50. HSBC shares trading in the U.S. rose 56 cents to $49.86.