By Hilary Russ
NEW YORK (Reuters) - U.S. stocks closed higher on Monday, with the S&P 500 hitting a two-week high on the back of strong earnings and a flurry of deal activity, while the U.S. dollar hovered near a nine-month peak against other world currencies.
However, Canada's main stock index unofficially closed 0.11 percent lower as oil and gold prices weighed on shares of energy and mining companies, offsetting gains by financial firms.
Merger and acquisition activity spurred Wall Street, headed by Saturday's announcement by telecommunications company AT&T Inc (NYSE:T) that it plans to buy Time Warner Inc (NYSE:TWX) for $85.4 billion in what would be the world's biggest deal this year.
Strong quarterly earnings also boosted investor confidence. Third-quarter earnings are expected to increase 1.1 percent after four consecutive quarters of contraction, according to Thomson Reuters data.
More than a third of the S&P 500 components are scheduled to report earnings this week, including heavyweights such as Apple (NASDAQ:AAPL) and Boeing (NYSE:BA).
"Consensus is earnings are going to continue to improve in part due to favourable energy prices and to strong consumption patterns here in the U.S.," said Chad Morganlander, portfolio manager at Stifel Nicolaus in Florham Park, New Jersey.
The Dow Jones industrial average rose 77.32 points, or 0.43 percent, to 18,223.03, the S&P 500 gained 10.17 points, or 0.47 percent, to 2,151.33 and the Nasdaq Composite added 52.43 points, or 1 percent, to 5,309.83.
The greenback rose on expectations of a Federal Reserve interest rate increase in December.
Against a basket of six major currencies, the dollar was up slightly at 98.775, just off a roughly nine-month high of 98.846 touched earlier on Monday. The dollar also briefly hit a one-week high against the yen.
Gold prices slipped 0.16 percent to $1,264.27 an ounce by 4:30 p.m. EDT (2030 GMT) on the stronger dollar and interest rate hike speculation.
Oil started lower after Iraq said it wanted to be exempt from an Organization of the Petroleum Exporting Countries deal to cut production.
Prices fell as much as 2 percent on news that Britain's Buzzard oilfield will restart on Tuesday or Wednesday, but later recovered slightly.
U.S. crude slid below $50 per barrel for the first time since Oct. 18, which triggered technical selling.
Brent, the international benchmark for crude, settled down 32 cents, or 0.6 percent, at $51.46 a barrel. U.S. West Texas Intermediate (WTI) crude fell 33 cents, or 0.7 percent, to settle at $50.52.
AT&T and Time Warner closed sharply lower, down 1.68 percent and 3.06 percent, respectively. Wall Street signalled scepticism that AT&T would secure the government approvals needed to carry out its acquisition.
Spain's IBEX index led gains in Europe on signs that 10 months of political deadlock could end. The impasse has paralysed government in one of the countries worst-hit by the euro zone's debt crisis.
U.S. Treasury yields lurched higher, in line with a rise in global bond yields, with traders seeing little action ahead of next week's Federal Open Market Committee meeting.