U.S. stocks rise as deals outweigh rate worries

NEW YORK, June 26 (Reuters) U.S. stocks edged higher on Monday in a skittish session as a wave of multibillion dollar takeovers outweighed concerns about this week's policy-setting meeting of the Federal Reserve.

Shares of Pfizer Inc. led advances, rising 2 percent after the drug maker reached a definitive agreement to sell its consumer health-care arm for .6 billion to Johnson&Johnson. For details, see ID:nL26727004 But analysts said investors would be wary of making huge bets before the Fed's announcement on Thursday in which policy makers are expected to raise interest rates and may give clues on the outlook for rates.

''The latest wave of mergers and acquisitions is helping the markets a bit. But the Fed meeting later this week may prevail,'' said Michael Viracola, co-director of equities at Conaccord Adams in Boston. ''Many investors will be on the sidelines until they have an idea of what's the outlook for interest rates.'' The Dow Jones industrial average was up 18.33 points, or 0.17 percent, at 11,007.42. The Standard&Poor's 500 Index was up 1.70 points, or 0.14 percent, at 1,246.20. The Nasdaq Composite Index was up 10.03 points, or 0.47 percent, at 2,131.50.

Pfizer shares were the biggest gainer on the S&P, rising 1.9 percent to .08, while Johnson&Johnson shares were the biggest drag on both the Dow and the S&P.

J&J, the diversified health-care company, forecast its proposed acquisition of the Pfizer unit to pressure earnings through 2008.

ID:nN26423397 Its shares fell 1.9 percent to .15 on the New York Stock Exchange.

In other deal news, Phelps Dodge said it would buy Inco and Falconbridge for about billion in a deal to create a top global copper and nickel miner. ID:nN26402867 Phelps Dodge shares fell 9.6 percent to on the NYSE.

On the economic front, the government reported stronger-than-expected new home sales in May. For details, see ID:nN26424325 The pace of new home sales rose to a seasonally adjusted 1.234 million unit annual rate from a downwardly revised 1.180 million unit pace in April, the Commerce Department said.

Economists polled by Reuters were expecting sales of new homes to slow in May to a 1.150 million unit pace from an originally reported 1.198 million unit rate in April.

REUTERS DKS RS2007