Wall Street rises on strong earnings, M&A boost

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 4.7 percent after the world's biggest food chain reported a better-than-expected rise in sales at its restaurants.

The consumer discretionary index was up 0.8 percent, which led the gains among the 11 major S&P sectors.

Shares of oil refiner Andeavor surged 15.9 percent, the biggest gainer on the S&P 500, after rival Marathon Petroleum agreed to buy the company for more than $23 billion. Marathon's shares were down 4.2 percent.

The main indexes are on track to record their first monthly gain since January as strong quarterly earnings take the lead, even as investors weigh concerns about rising interest rates and inflation.

"If the previous several weeks of earnings season are any indication, corporate results should continue to act as a buffer to any meaningful turn lower in equity markets," noted Peter Kenney, senior market strategist at Global Markets Advisory Group, in New York.

"However, the principal threat to equity markets remains rising interest rates."

U.S. bond yields edged lower after data showed March personal income rose 0.3 percent, lower than estimates of 0.4 percent.

On the consumption side, personal spending in February was lowered to 0.3 percent, from the previously reported 0.4 percent.

Focus will turn to the Federal Reserve, when it meets on May 1 and 2 to discuss monetary policy. Though the central bank is not expected to raise rates, investors will be on the watch for clues about inflation and the pace of future rate hikes.

Despite strong results, warnings from some large U.S. manufacturers about escalating costs going forward, had investors worried that profit margins may get squeezed.

Of the 267 S&P 500 firms that reported first-quarter earnings as of Friday, 79.4 percent topped profit expectations, according to Thomson Reuters data. That lifted the estimate for earnings growth to 24.6 percent from about 18 percent at the start of the season.

At 10:01 a.m. ET, the Dow Jones Industrial Average was up 156.55 points, or 0.64 percent, at 24,467.74, the S&P 500 was up 9.81 points, or 0.37 percent, at 2,679.72 and the Nasdaq Composite was up 34.40 points, or 0.48 percent, at 7,154.20.

Investors are also keeping an eye on developments around the $26 billion takeover of wireless carrier Sprint by T-Mobile announced on Sunday, which needs to clear five regulatory hurdles.

Sprint fell 12.8 percent, while T-Mobile was down 5.1 percent.

Allergan Plc reversed course to fall 1.6 percent after its quarterly profit topped Wall Street estimates.

Technology stocks were the biggest boost, led by Apple's 2.4 percent rise ahead of its results on Tuesday.

Advancing issues outnumbered decliners for a 1.75-to-1 ratio on the NYSE and for a 1.64-to-1 ratio on the Nasdaq.

The S&P index recorded 16 new 52-week highs and four new lows, while the Nasdaq recorded 35 new highs and nine new lows.

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