Wall Street edges higher on strong McDonald's earnings, health drags

By Sruthi Shankar

(Reuters) - U.S. stocks rose on Monday as strong earnings reports from McDonald's and a slate of merger announcements lifted sentiment, while inflation worries were kept in check after tepid data on U.S. income and spending.

McDonald's jumped 5.3 percent after the world's biggest fast-food chain by revenue topped analysts' forecasts for profit and sales.

Shares of oil refiner Andeavor surged 14.4 percent, the biggest percentage gainer on the S&P 500, after rival Marathon Petroleum agreed to buy the company for more than $23 billion. Marathon's shares slid 4.2 percent.

"The big news was really the deals, that continue the trend of strong M&A environment," said Aaron Clark, portfolio manager at GW&K Investment Management in Boston, Massachusetts.

Walmart rose about 2 percent after Sainsbury's agreed to buy the UK arm of Walmart, Asda, for about $10 billion, while Marriott Vacations Worldwide said it would buy timeshare operator ILG Inc for $4.7 billion, sending the target company's shares up 4.5 percent.

Another big deal announcement was that of T-Mobile's $26 billion takeover of fellow wireless carrier Sprint. Sprint shares fell 13.5 percent as analysts said it could face antitrust hurdles and the offer was seen as less favorable than an earlier one.

"Muted reactions to what was very strong earnings, capex spending picking up and strong M&A applies to what I'd say is part of classic late-cycle behavior," said Clark.

At 11:36 a.m. ET, the Dow Jones Industrial Average was up 125.42 points, or 0.52 percent, at 24,436.61, the S&P 500 was up 4.38 points, or 0.16 percent, at 2,674.29 and the Nasdaq Composite was up 7.74 points, or 0.11 percent, at 7,127.54.

U.S. bond yields edged lower after data showed March personal income rose lesser-than-expected, and personal spending in February was revised down to 0.3 percent, from the previously reported 0.4 percent.

Of the 274 S&P 500 firms that have reported first-quarter earnings so far, 79.2 percent topped profit expectations, according to Thomson Reuters data. That has lifted the estimate for earnings growth to 24.6 percent from about 18 percent at the start of the season.

Healthcare stocks were a drag, led by Celgene's 6 percent fall after Morgan Stanley noted it expects delay of up to three years for the company's key multiple sclerosis drug. The S&P healthcare index was was down about 0.6 percent.

Arconic plummeted 15.2 percent after the aluminum products maker slashed its 2018 forecasts for profit and free cash flow as higher prices of the metal squeezed profit margins.

Allergan Plc reversed course to fall 4.1 percent after its chief executive officer said he was opposed to fundamental changes to the drug company's business strategy.

Advancing issues outnumbered decliners for a 1.16-to-1 ratio on the NYSE and for a 1.04-to-1 ratio on the Nasdaq.

The S&P index recorded 19 new 52-week highs and five new lows, while the Nasdaq recorded 42 new highs and 19 new lows.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)