By Leah Schnurr
NEW YORK (Reuters) - Stocks rose on Tuesday as agriculture shares got a lift from M&A talk and after stronger-than-expected profits from retailers Wal-Mart and Home Depot.
A glimmer of strength in the economy also buoyed investors after data showed growth in U.S. industrial production, while the government's Producer Price Index eased deflation fears.
The materials sector handily outperformed the broad market after BHP Billiton Ltd
Potash's U.S.-traded stock surged 25.1 percent to $140.30. Fertilizer producer CF Industries
"The increase in M&A shows CEO's and CFO's have more confidence in the outlook for the economy and are willing to start to deploy some of the high cash balances, which have built up in recent months," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.
Standard & Poor's estimates S&P 500 companies had $836.8
billion in cash and equivalents on the books at the end of the first quarter.
The Dow Jones industrial average <.DJI> gained 136.23 points, or 1.32 percent, to 10,438.24. The Standard & Poor's 500 Index <.SPX> rose 16.42 points, or 1.52 percent, to 1,095.80. The Nasdaq Composite Index <.IXIC> climbed 34.02 points, or 1.56 percent, to 2,215.89.
In economic news, U.S. industrial production expanded in July at twice the clip that was expected, a bright spot after recent data pointed to a slowdown in growth. Output gains were across the board, including in business equipment, which fueled optimism that business spending would buoy the economy even as consumer spending remains weak.
"To see those core capital goods be the real reason for the increase in industrial production ... shows things are perhaps not as dire as they appeared last week," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.
Among sectors boosted by the data were industrials, materials and technology. Heavy-equipment maker Caterpillar
Other data was mixed, with housing starts rising in July to a weaker level than expected. Prices paid at the farm and factory gate, excluding food and energy, rose 0.3 percent in July, easing investor worries about the threat of deflation.
The Dow was buoyed by gains in Wal-Mart Stores Inc
Even so, both companies reported sales that missed expectations and Wal-Mart noted consumer sentiment is still soft. Tepid consumer spending remains one of the biggest headwinds for a sustainable recovery.
(Reporting by Leah Schnurr; Editing by Kenneth Barry)
