NEW YORK (AP) - The stock market had its third straight winning day on signs that companies are becoming more optimistic about the economy.

The Dow Jones industrial average edged up two points yesterday but closed off its best levels. The Dow had managed to erase its losses for the year during trading but was down 22 points for 2010 by the close. Broader indexes pushed into the black for the year on Monday and extended the gains yesterday.

More merger activity and a plan by Qualcomm Inc. to buy back stock brought reassurance that business leaders expect the recovery to continue. The economy's health had been in doubt in recent months after reports indicated the pace of improvement was slowing and as countries including Greece struggled with heavy debt loads.

In deal news, CF Industries made a new offer for fertilizer maker Terra Industries, which last month agreed to be sold to Norway's Yara for $4.1 billion. Dow Chemical Co. sold its Styron plastics business to private equity firm Bain Capital for $1.63 billion. Investors see takeovers as a sign of confidence in the economy.

Meanwhile, Qualcomm said it would buy back $3 billion in stock. The maker of wireless chips and other mobile technology also raised its dividend by 12 percent. The stock rose 6.7 percent.

Markets got a lift from upbeat economic reports abroad and growing hopes European leaders will complete a bailout for Greece.

There was other welcome news from overseas. Manufacturing exports in India rose for a third month in January and new orders reached an 18-month high last month. Japan's unemployment rate dropped for the second straight month in January and household spending grew.

The array of reports about dealmaking and improvements in economic readings are clues for investors who are trying to determine how fast a recovery will take place. A long climb in the stock market began to stall in mid-January following mixed economic reports and concern about debt in Greece and other relatively weak European economies like Portugal and Spain.

Major stock indexes stand at their highest levels in more than a month but the gains have come in light trading volume. That indicates many investors are staying out of the market as they await more evidence about the economy.

Darell Krasnoff, managing director at Bel Air Investment Advisors in Los Angeles, said the advance after the slide in January and early February are a sign that the market needed a break before it could proceed. Still, he said that investors still feel burned by the slide in 2008 and early 2009 and have concerns about the economy. That could unravel the climb.

"There is still tremendous anxiety about the state of the global economy," he said. "It doesn't take much to rekindle the animal spirits of the bear market."

According to preliminary calculations, the Dow rose 2.19, or less than 0.1 percent, to 10,405.98. It is up 85 points in three days.

The broader Standard & Poor's 500 index rose 2.6, or 0.2 percent, to 1,118.31, and the Nasdaq rose 7.22, or 0.3 percent, to 2,280.79.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged at 3.61 percent from late on Monday.

The dollar mostly fell against other major currencies. Gold prices rose.

Crude oil rose 98 cents to $79.68 per barrel on the New York Mercantile Exchange.

Stocks rose on Monday after American International Group agreed to sell its Asian life insurance business for $35.5 billion. The bailed-out insurer is selling off divisions to help repay government loans.

A bad report on jobs could puncture the improved mood because unemployment is seen by many analysts as the biggest obstacle to a sustained recovery. The Labour Department's February employment report is due on Friday. It is expected to show the unemployment rate rose to 9.8 percent from 9.7 percent in January.

Many investors remain cautious, but there is also a chance some are becoming complacent. The Chicago Board Options Exchange's Volatility Index (VIX), which is known as the market's fear gauge, fell below 19 trading. A drop in the VIX suggests investors are expecting fewer swings in the market. The VIX has not traded at that level since January 21, two days after the Dow began to fall from a 15-month high.