NEW YORK — Wall Street found some room for optimism Monday as news that drug maker Pfizer will acquire rival Wyeth showed deal-making is possible in a recession.

Stock futures rose after wobbling briefly on disappointing comments from Caterpillar Inc. about the health of its business. Caterpillar reported that its fourth-quarter earnings fell 32 percent and that it would lay off workers and cut executive pay. The maker of heavy equipment said it would offer buyouts to 25,000 employees in the U.S.

Caterpillar said Monday it was "whipsawed" in the final three months of 2008 as a sharp drop in economic conditions and plunging commodity prices hit industries like mining that use the company's equipment.

Caterpillar's report briefly overshadowed merger news. Pfizer Inc. confirmed weekend reports that it would acquire Wyeth for $68 billion. The cash-and-stock deal represents a 29 percent premium to Wyeth's closing share price Friday.

The combined company will have 17 products that each have more than $1 billion in annual sales. But beyond the implications for the drug industry, the $22.5 billion in financing put up by banks for the combination is a reassuring sign for Wall Street that the credit markets are slowly starting to improve after locking up following the mid-September bankruptcy of Lehman Brothers Holdings Inc. That failure left lenders hesitant to extend credit.

But not all deals are going through. Rohm and Haas Co. said Monday that Dow Chemical Co. scrapped its planned acquisition of the company, which was expected to close Tuesday.

The Home Depot Inc. announced plans to cut 7,000 jobs and close its smaller Expo chain as the company struggles with the weak housing market.

There was some upbeat earnings news from McDonald's Corp., which posted better-than-expected profits. Same-store sales, or sales at stores open at least a year, rose worldwide and in the U.S., where the company's low-prices have been a draw for consumers worried about the economy.

Dow Jones industrial average futures rose 62, or 0.78 percent, to 8,035. S&P 500 index futures rose 6.40, or 0.78 percent, to 829.90, while Nasdaq 100 index futures rose 9.75, or 0.84 percent, to 1,174.00.

Monday's reports were part of another busy week of quarterly earnings announcements. Results are due Monday from some of biggest companies in a range of industries, including American Express Co. and Texas Instruments.

About half the companies in the Standard & Poor's 500 index that have reported results have fallen short of analysts' already reduced estimates. The poor showing has left investors nervous that the economy is in worse shape than feared. The coming week's numbers and company's comments about the coming year, will play a big part in shaping investor sentiment.

"It's almost like a teeter-totter right now," said Alan Lancz, money manager at Alan B. Lancz & Associates. "Earnings season is always treacherous in this kind of global economic environment with all the uncertainty."

Stocks ended last week with losses of more than 2 percent as companies' results weighed on the market.

Investors are also awaiting a report on sales of existing homes sales and a monthly forecast of economic activity. Both reports, which are due after the opening bell, are expected to show weakness from previous months.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.63 percent from 2.62 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.10 percent from 0.09 percent Friday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 72 cents to $45.75 in pre-market electronic trading on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 0.08 percent. In afternoon trading, Britain's FTSE 100 rose 1.85 percent, Germany's DAX index rose 1.39 percent, and France's CAC-40 rose 1.60 percent.