(RTTNews) - Stocks saw moderate strength on Tuesday, as recent economic optimism generated some buying interest on a light day on the economic front. The major averages all closed in positive territory, extending their gains for a third straight session.

In corporate news, candy maker Cadbury (CBY) rejected a $16.7 billion takeover offer from packaged food giant Kraft Foods Inc. (KFT), saying that the proposal fundamentally undervalued the company and its prospects.

Despite the outright rejection by Cadbury, Kraft Foods reiterated that it would pursue the takeover by maintaining a constructive dialogue and further the merger process.

IBM (IBM) reiterated that it expects full year 2009 earnings of at least $9.70 per share. The technology giant also said that it was “well ahead” on its plan to achieve full year 2010 earnings of $10 to $11 per share.

Meanwhile, Smithfield Foods (SFD), a fresh pork and packaged meats processor, reported a wider net loss for the first quarter, as sales declined from the previous year due to lower volumes, currency fluctuations and a decline in fresh pork selling prices. The stock closed down by 2.6 percent.

In other news, the United States economy has lost its top position as the most competitive economy in the world, according to the World Economic Forum’s 2009-2010 Global Competitiveness Report.

The Geneva-based WEF reported that Switzerland has the most competitive economy, scoring a 5.60 on its Global Competitiveness Index, while the U.S. dropped to the second position, scoring a 5.59, because of weaker financial markets and less macroeconomic stability.

The major averages all saw some upside in late day trading, closing near their best levels of the day. The Dow finished up by 56.07 points or 0.6 percent at 9,497.34, the Nasdaq rose 18.99 points or 0.9 percent to 2,037.77 and the S&P 500 advanced by 8.99 points or 0.9 percent to 1,025.39.

Sector News

Resource stocks turned in some of the market’s best performances amid a notable increase in commodities prices. Steel, oil service and natural gas stocks led the way higher in the sector, while gold stocks were largely unable to hold onto their early gains.

Commercial real estate stocks saw comparable gains, with the Morgan Stanley REIT Index posting a gain of 3.6 percent. Despite finishing higher for the third straight session, the index is stuck in a recent trading range, extending last month’s essentially sideways move.

Semiconductor stocks also saw notable gains on the day, with the Philadelphia Semiconductor Index rising by 2.3 percent. The index ended the session at its best closing level in eleven months.

The index was helped by shares of Advanced Micro Devices Inc. (AMD), which surged by 14.6 percent on the session. The stock also finished the day at an eleven-month closing high, benefiting from an upgrade at Barclays Capital. The broker raised the stock rating to Overweight from Equal Weight, citing an improving PC market.

Electronic storage, brokerage and defense stocks also advanced, among others, while some health insurance stocks bucked the uptrend ahead of President Barack Obama’s healthcare speech to a joint session of Congress on Wednesday.

Dow Components

General Electric (GE) led the Dow higher, posting a gain of 4.5 percent. With the advance, the stock finished the day at its best closing price in a month. The upside came after JP Morgan upgraded its rating on the stock to Overweight from Neutral.

Alcoa (AA) and Procter & Gamble (PG) also rose, posting gains of 3.5 percent and 2.5 percent, respectively. Despite the day’s gains, the stocks remained stuck in recent trading ranges.

While Chevron (CVX), Exxon Mobil (XOM), and Home Depot (HD) also moved notably higher, considerable weakness was visible in shares of Kraft Foods, which dipped by 5.9 percent following its rejected takeover attempt of Cadbury. The stock closed at its lowest price in about two months.

Travelers (TRV) and Pfizer (PFE) also slid, although by more modest margins, posting losses of 1.7 percent and 1.1 percent, respectively. Travelers moved further away from the eleven-month closing high it set late last month, while Pfizer stayed in a range.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Monday. Japan’s benchmark Nikkei 225 Index closed up by 0.7 percent, while Hong Kong’s Hang Seng Index surged up 2.1 percent.

The major European markets also closed modestly higher, with the French CAC 40 Index closing up by 0.2 percent, while the German DAX Index and the U.K.’s FTSE 100 Index both rose by 0.3 percent.

In the bond markets, treasuries saw modest weakness despite strong results from today’s three-year note auction. Subsequently, the yield on the benchmark ten-year note closed at 3.469 percent, posting a gain of 2.7 basis points.

Looking Ahead

The economic calendar of this holiday-shortened week is relatively light, with Wednesday’s Beige Book report from the Federal Reserve and Friday’s Reuters/University of Michigan consumer sentiment index among the only significant data due to be released during the week.

The Beige Book is expected to echo the recent optimism that has been evident in most recent economic reports, while the consumer sentiment index isn’t likely to see a notable improvement from recent levels, given the close relation consumer confidence has with income and jobs.

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Posted in Categories: Economy, Eurozone, Japan, Releases, Switzerland, USA.

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