A warning from New Century Financial Corp. early today about its financial woes initially overshadowed acquisition news involving companies such as Dollar General Corp. and Schering-Plough Inc. Investors have faced concerns that a blowup among companies making loans to consumers with poor credit could spill into other industries.

The Dow Jones industrial average rose 42.30, or 0.34 percent, to 12,318.62.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 3.75, or 0.27 percent, to 1,406.60, and the Nasdaq composite index rose 14.74, or 0.62 percent, to 2,402.29.

Bonds rose amid concerns about subprime lenders; the yield on the benchmark 10-year Treasury note fell to 4.56 percent from 4.59 percent late Friday. The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude settled down $1.14 to $58.91 per barrel on the New York Mercantile Exchange.

Advancing issues outnumbered decliners by about 2 to 1 on the NYSE, where volume came to 2.62 billion shares, compared with 2.59 billion shares billion Friday.

The Russell 2000 index of smaller companies rose 3.88, or 0.49 percent, to 789.00.

Overseas, Japan's Nikkei stock average rose 0.75 percent, Hong Kong's Hang Seng index added 1.61 percent and the Shanghai Composite Index added 0.58 percent. Britain's FTSE 100 closed down 0.19 percent, Germany's DAX index fell 0.02 percent, and France's CAC-40 fell 0.75 percent.

FEDERAL DEFICIT DOWN

Investors appeared pleased by a report that the federal deficit for the first five months of the fiscal year is down 25.5 percent from a year earlier.

Frederic Dickson, market strategist and director of retail research at D.A. Davidson & Co., said while the budget deficit number was largely anticipated, the figure could help reassure investors after weeks in which the vitality of the economy has come under scrutiny.

"The deficit was reduced, signaling that federal receipts are higher than what analysts had expected. It indicates the economy is growing at least a moderate pace with no signs of falloff," he said.

Today's trading resembled that of much of the last eight months, a period marked by low volatility. Many sessions since the worldwide selloff last month have seen choppiness as investors hunted for signs of where the market was headed. Today's trading perhaps reflected a further sense that Wall Street had regained its footing. Investors will be looking to economic data due this week on retail sales and inflation and at earnings news as brokerages announce results.

NEWS OF BUYOUTS

The day's buyout news offered support for stocks amid the din over subprime lenders. The concerns about the subprime sector follow a relatively successful week on Wall Street. Stocks etched out gains last week. U.S. and overseas markets managed to regain some sense of stability following a sharp pullback that began Feb. 27. Even amid the gains seen last week, however, concerns about subprime lenders weighed on investors.

New Century Financial Corp. warned today in a filing with the Securities and Exchange Commission that all its lenders had cut off short-term funding or announced plans to do so after the subprime mortgage lender wasn't able to make payments. New Century, which relies on short-term borrowings to finance mortgage loan originations and purchases, said it would need about $8.4 billion should it be forced to repurchase all outstanding mortgage loans. The company said it doesn't have sufficient liquidity to meet its obligations for repurchasing mortgages.

Trading in New Century shares remained halted with news pending, as it had been before the opening bell. The New York Stock Exchange said it is reviewing the listing status of New Century shares.

Other subprime lenders fell sharply. Fremont General fell $1.30, or 16.2 percent, to $6.73, while Novastar Financial Inc. fell $1, or 19.1 percent, to $4.24.

Homebuilders also fell in part amid concerns that tightening credit standards will make it harder for consumers with smaller incomes to purchase homes. Hovnanian Enterprises Inc. fell $1.75, or 6 percent to $27.59, while Pulte Homes Inc. fell $1.38, or 4.8 percent, to $27.38.

Investors have grown uneasy about the subprime market amid fresh concerns about the ability of some homeowners with spotty credit to continue to make mortgage payments.

CORPORATE NEWS

In other corporate news, word that private-equity company Kohlberg Kravis Roberts & Co. struck a deal to acquire Dollar General for about $6.87 billion sent the discount retailer sharply higher. Dollar General jumped $4.29, or 25.6 percent, to $21.07 — well past the stock's 52 week high of $18.32.

Schering-Plough fell rose 10 cents to $23.95 after agreeing to purchase the Organon BioSciences BV pharmaceuticals business of Akzo Nobel NV, the Dutch maker of chemicals and coatings, for $14.5 billion. Akzo rose $10.02, or 16.5 percent, to $70.83.

UnitedHealth Group Inc., the health insurer, announced plans to acquire healthcare services provider Sierra Health Services Inc. for about $2.6 billion. Sierra Health rose $5.67, or 15.8 percent, to $41.57, while UnitedHealth advanced 27 cents to $53.27.

Procter & Gamble Co., the consumer products company, said it struck a deal to sell its Western European tissue and towel business to SCA, which makes paper and other products, for about $671.9 million. P&G, also a Dow component, fell 7 cents to $62.09.

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