Oracle Corp. announced that PeopleSoft Inc. would accept a $26.50-per-share bid, valuing the rival software company at $10.3 billion. The agreement ends an 18-month feud between the two that featured courtroom intrigue and pithy public statements, and cheered investors who feared the battle would distract the companies from their core businesses.

Wall Street also applauded the Commerce Department's report on November retail sales, which rose 0.1 percent, better than the flat sales economists had expected. Taking auto sales out of the equation, retail sales rose 0.5 percent for the month. Wall Street had expected a 0.3 percent rise excluding autos.

"I think the retail sales numbers helped, alleviating a lot of the concern over holiday sales prospects. And then on top of that you have all this merger activity," said Bryan Piskorowski, market strategist for Wachovia Securities. "Mid-month is typically pretty quiet, but this news is bringing some people back into the market."

According to preliminary calculations, the Dow Jones industrial average rose 95.10, or 0.9 percent, to 10,638.32, finishing near its high for the session.

Broader stock indicators were strongly higher. The Standard & Poor's 500 index was up 10.68, or 0.9 percent, at 1,198.68, and the Nasdaq composite index gained 20.43, or 0.96 percent, to 2,148.50.

Investors also received good news from the Commerce Department's latest business inventory report. The 0.2 percent rise in inventories for November was less than expected, meaning that demand for goods could be picking up.

A small rise in oil futures did little to rattle investors, who remain pleased that prices remain near their five-month lows. A barrel of light crude was quoted at $41.01, up 30 cents, on the New York Mercantile Exchange.

Between oil prices and the retail sales figures, investors were becoming more enthusiastic about the economy, analysts said, and were hopeful that the Federal Reserve, meeting tomorrow, would confirm that view in its policy statement.

"I think the economy is doing pretty well, better than a lot of people expected," said Bill Groenveld, head trader for vFinance Investments. "If there's not a lot of tax-related selling and we say in this trading range, we could be setting ourselves up for a nice new trend in January."

In addition to completing the PeopleSoft deal, Oracle posted strong quarterly earnings, beating Wall Street profit forecasts by 3 cents per share. The software maker also issued a better-than-expected outlook for the current quarter. Oracle gained $1.35, or 10.2 percent, to $14.63, while PeopleSoft surged $2.47, or 10.4 percent, to $26.42.

In other merger news, Sprint Corp. and Nextel Communications Inc. reportedly are drawing closer to a $36 billion merger pact. However, Verizon Communications Inc.'s wireless division is also reportedly preparing a counter-bid for Nextel. Sprint added 30 cents to $24.44, Nextel climbed 23 cents to $29.99, and Verizon was up 48 cents at $41.28.

Dow component Honeywell Inc. gained $1.14 to $36.45 after the aerospace and defense manufacturer lowered its profit forecasts for 2005 but reiterated strong earnings for the current quarter and 2004. Honeywell also announced plans to purchase British industrial holding company Novar PLC for $1.7 billion.