Market shows signs of optimism

NEW YORK — The stock market had its third straight winning day on signs that companies are becoming more optimistic about the economy.

The Dow Jones industrial average edged up 2 points Tuesday but closed off its best levels. The Dow had managed to erase its losses for the year during trading but was down 22 points for 2010 by the close. Broader indexes pushed into the black for the year on Monday and extended their gains Tuesday.

More merger activity and a plan by Qualcomm to buy back stock brought reassurance that business leaders expect the recovery to continue. The economy's health had been in doubt in recent months after reports indicated the pace of improvement was slowing and as some countries, including Greece, struggled with heavy debt loads.

In deal news, CF Industries made a new offer for fertilizer maker Terra Industries, which last month agreed to be sold to Norway's Yara for $4.1 billion. Dow Chemical Co. sold its Styron plastics business to private equity firm Bain Capital for $1.63 billion. Investors often see takeovers as signs of confidence in the economy.

Meanwhile, Qualcomm said it would buy back $3 billion in stock and raise its dividend by 12 percent. Shares of the maker of wireless chips and other mobile technology rose 6.7 percent.

Markets got a lift from upbeat economic reports abroad and growing hopes that European leaders will come up with a bailout for Greece. The Greek government is scheduled to detail deeper spending cuts on Wednesday.

Manufacturing exports in India rose for a third month in January and new orders reached an 18-month high last month. Japan's unemployment rate dropped for the second straight month in January and household spending grew.

The array of reports about dealmaking and global economic readings are clues for investors who are trying to determine how fast a recovery will take place. A long climb in the stock market began to stall in mid-January following mixed economic reports and concern about debt in Greece and other relatively weak European economies like Portugal and Spain.

Major stock indexes stand at their highest levels in more than a month but the gains have come in light trading volume. That indicates many investors are staying out of the market as they await more evidence about the economy.

Darell Krasnoff, managing director at Bel Air Investment Advisors in Los Angeles, said the rebound after the slide in January and early February is a sign that the market needed a break before it could proceed. Still, he said that investors feel burned by the slide in 2008 and early 2009 and have concerns about the economy.

"There is still tremendous anxiety about the state of the global economy," he said. "It doesn't take much to rekindle the animal spirits of the bear market."

The Dow rose 2.19, or less than 0.1 percent, to 10,405.98. It is up 85 points in three days and is at its highest level since Jan. 20.