US STOCKS-Energy shares, M&A activity spur gains

                                
 * Weakening dollar lifts energy, natural resource shares
                                
 * Kraft's bid for Cadbury revives M&A hopes
                                
 * Dow up 0.4 pct, S&P up 0.7 pct, Nasdaq up 0.6 pct
 (Updates to early afternoon, changes byline)
                                
 By Angela Moon
                                
 NEW YORK, Sept 8 (Reuters) - U.S. stocks advanced on
Tuesday, led by gains from oil and materials companies, while
an uptick in M&A activity spurred recovery hopes, making
equities more appealing to investors.
                                
 Energy shares led the S&P 500 index higher as oil futures
<CLc1> rose 4.8 percent to $71.30 a barrel thanks to a weak
dollar.
                                
 Kraft Foods Inc <KFT.N>, North America's biggest food
company, said it was intent on pursuing Britain's Cadbury
<CBRY.L> despite the confectionary company's rejection of a
$16.7 billion Kraft bid made on Monday.
                                
 The news of the rebuff sent Kraft shares down 5.9 percent
to $26.45, but speculation about potential suitors for Cadbury
buoyed the overall market sentiment. For details, see
[ID:nN08277259].
                                
 "The M&A news was very supportive to the market," said
Bruce Bittles, chief investment strategist at Robert W. Baird &
Co in Nashville, Tennessee.
                                
 "Ever since the market's big rally, a lot of folks have
been concerned about valuations. But when you see a bid like
this, it eases those fears."
                                
 The Dow Jones industrial average <.DJI> was up 40.81
points, or 0.43 percent, at 9,482.08. The Standard & Poor's 500
Index <.SPX> gained 7.27 points, or 0.72 percent, at 1,023.67.
The Nasdaq Composite Index <.IXIC> rose 11.74 points, or 0.58
percent, at 2,030.52.
                                
 The Kraft bid comes after France Telecom <FTE.PA> and
Deutsche Telekom <DTEGn.DE> announced plans to merge their
British mobile units and after Walt Disney Co's <DIS.N> deal
last week to buy Marvel Entertainment Inc <MVL.N> for $4
billion.
                                
 Although Kraft's stock fell, other food companies rose,
including Hershey Co <HSY.N>, which added 1.3 percent to
$39.14. Some analysts pointed to the possibility of Hershey and
Nestle <NESN.VX> making a joint bid for Cadbury.
                                
 In the oil sector, Chevron Corp <CVX.N> rose 2.3 percent to
$70.53 and provided the top boost to the Dow, while the S&P
index of energy companies <.GSPE> was up 2.5 percent.
[ID:nL8235192].
                                
 Freeport-McMoRan Copper & Gold Inc <FCX.N> gained 3.2
percent to $68.09 as spot gold <XAU=> rose above $1,000 an
ounce to its highest since March 2008 on a wave of technical
momentum and dollar weakness before paring gains to $997.
[ID:nN08448216].
                                
 Health insurance stocks <.HMO> slid 1.5 percent before U.S.
President Barack Obama's address to Congress on Wednesday. He
is expected to outline his proposed revamp of the healthcare
system.
                                
 Shares of General Electric Co <GE.N> advanced 4.6 percent
to $14.51 after J.P. Morgan Securities upgraded the stock,
saying it was one of the last equities for which a little good
news could still go a long way. [ID:nBNG44387].
                                
 On the Nasdaq, shares of iPod maker Apple Inc <AAPL.O> rose
2.2 percent to $172.50 after Morgan Stanley raised its price
target to $200 from $195. The Morgan Stanley also raised the
U.S. systems and PC hardware sector to "attractive" from "in
line." [ID:nBNG31681].
 (Editing by Kenneth Barry)