NEW YORK (AP) — Wall Street stocks surged, pushing up the Dow Jones industrials by more than 100 points as a report that two companies are trying to buy Alcoa stoked investors’ hopes for a pickup in take-over activity.Australia-based mining companies BHP Billiton and Rio Tinto are each planning to offer $40 billion for the aluminium producer, according to the Times of London.

The report came amid Hindalco Industries’ $3.6 billion offer to buy Canadian aluminium maker Novelis, and drugstore operator CVS Corporation’s move to bump up the value of its proposed purchase of Caremark Rx.

The flurry of takeover-related news suggested that the global economy has some muscle. Investors were also encouraged by rebounding oil prices, an upgrade of General Motors, and a stock buyback by 3M.

Analysts cautioned, though, that Tuesday’s rally followed three straight days of drops in the Dow, and that recent earnings reports have been mixed. Futhermore, Federal Reserve Chairman Ben Bernanke could hint in his testimony to Congress today, as many Fed officials did last week, that rising inflation might compel policy makers to hike interest rates — a move that could hurt consumer spending.

“The optimists are lifting their heads today despite all the pessimism in the market right now,” said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. “They’re making the bet that his comments will be benign, rather than scary and hawkish.”

The Dow climbed 102.30, or 0.81 percent, to 12,654.85.

It was the biggest one-day jump since December 27.

Broader stock indicators also rose. The Standard & Poor’s 500 index increased 10.89, or 0.76 percent, to 1,444.26, and the Nasdaq composite index rose 9.50, or 0.39 percent, to 2,459.88.

With Treasury investors staying on the sidelines ahead of Bernanke’s testimony, bonds were little changed despite the Commerce Department’s report that the trade deficit grew more than expected in December, pushing the gap to its fifth consecutive annual record in 2006. The yield on the benchmark 10-year Treasury note was at 4.81 percent late Tuesday, the same as late Monday.

The dollar was lower against other major currencies, while gold prices edged slightly higher.

Oil prices rose $1.29 to settle at $59.06 a barrel after the International Energy Agency predicted a sharp rise in global demand in 2007.

The climb in energy prices led traders to buy oil company stocks. Exxon Mobil rose 85 cents to $75.45, Chevron rose 51 cents to $72.83, and ConocoPhillips rose $1.24 to $67.27.

Meanwhile, the metals and mining sector was boosted by the report on Alcoa. Alcoa rose $2.09, or 6.4 percent, to $34.99, while rival Alcan rose $2.58, or 4.9 percent, to $54.77.

In other signs that merger-and-acquisition activity is quickening, restaurant chain Applebee’s International said it is looking into a possible sale of the company, while CVS boosted the value of its proposed acquisition of Caremark.

Applebee’s rose $2.09, or 8.6 percent, to $26.32.

Caremark, which is also being pursued by Express Scripts, rose $1.92, or 3.2 percent, to $62.83.

Most major earnings reports on Tuesday came in strong. But Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., pointed out that overall, corporate financial results have been cooling off since last year’s high double-digit growth — notably in banks and oil companies, which were big drivers in previous quarters.

This moderation, along with the potential for Bernanke’s comments to rock the markets on Wednesday, led some market watchers to interpret Tuesday’s jump conservatively.

The report on Alcoa “has given the market some short-term fervor, but I don’t think it’s sustainable,” Battipaglia said. “Today’s action is very nice, but it’s a very narrow set of circumstances.”

Though stocks will likely keep seeing big, choppy swings as the market tries to gauge the pace of U.S. economic growth, most analysts say the market is still in an overall up-trend.

“The fundamental picture is better than it looked in mid-December,” said RBC Dain Rauscher’s Dow.