NEW YORK (Reuters) — US stocks rose yesterday as corporate takeovers and lower oil prices boosted optimism about the outlook for corporate profits, overshadowing a slide in Pfizer Inc.’s shares.The drop in oil prices spurred demand for industrial stocks such as diversified manufacturers United Technologies Corp., Honeywell International Inc. and 3M Co.

A break in the dollar’s recent decline also raised the allure of US stocks as investors bet on a strong Wall Street year-end finish.

“The bottom line, I think we had potentially oversold conditions due to the pullback on manufacturing (data) on Friday,” said John Lynch, chief market analyst at Evergreen Investment Management Co., in Charlotte, North Carolina.

“Today, certainly oil and very positive merger activity is bringing more people in, but I start to get nervous if we exceed fair value.”

The Dow Jones industrial average rose 89.72 points, or 0.74 percent, to 12,283.85. The Standard & Poor’s 500 Index gained 12.41 points, or 0.89 percent, to 1,409.12. The Nasdaq Composite Index added 35.18 points, or 1.46 percent, to 2,448.39.

The S&P 500 soared to a six-year high during the session, while the Nasdaq notched its biggest one-day percentage gain in nearly a month, snapping a two-session losing streak.

In yesterday’s deal news, Bank of New York Co. Inc. said it plans to buy Mellon Financial Corp. for about $16.5 billion to create the world’s largest securities servicing and asset management firm.

LSI Logic Corp., a maker of storage and DVD chips, said it would buy semiconductor and software storage company Agere Systems Inc., sparking a rally in chip stocks.

The semiconductor index rose two percent, its biggest percentage gain in almost three weeks, with chip sector related stocks such as Cisco Systems Inc. rising. Cisco shares gained 2.1 percent to end at $27.25 on the Nasdaq. Shares of International Business Machines Corp. rose 2.5 percent to $93.51 on the NYSE, a day after Barron’s newspaper said the company was evolving into a higher-growth software company under Chief Executive Sam Palmisano and its stock price had yet to reflect recent progress. IBM was the biggest gainer on Dow and No. 2 on the S&P 500.

But shares of Pfizer fell more than 10 percent, wiping out more than $30 billion of the drugmaker’s market value after it abandoned development of an experimental cholesterol drug.

Pfizer, the most heavily traded stock on the New York Stock Exchange, fell to end at $24.90, down $2.96. Its traded volume was the stock’s biggest in more than a year, with more than 283 million shares traded.

Bank of New York shares jumped 12 percent to end at $39.75 on the NYSE, while Mellon shares ended up 6.8 percent at $42.78. The Philadelphia Keefe Bruyette & Woods index of bank stocks was up 1.7 percent, its biggest one-day percentage gain in more than four months.

UTX shares gained 1.6 percent to $64.90, Honeywell gained 1.9 percent to $43.61, while 3M shares rose 1.1 percent to $80.89.

NYMEX crude for January delivery ended down $1.08 a barrel at $62.35 amid forecasts of warmer weather in the US and doubts among traders of another OPEC production cut.