Dow, S&P 500 edge modestly higher

The U.S. stock market closed higher Monday, with the Dow leading the gains as investors continued to focus on corporate earnings and prospects for tax cuts.

Where did benchmarks finish?

The S&P 500
SPX, +0.13%
gained 3.29 points, or 0.1%, to 2,582.14, with telecoms and financials topping the gains.

The Dow Jones Industrial Average
DJIA, +0.31%
rose 72.09 points, or 0.3%, to 23,430.33, and the Nasdaq Composite
COMP, +0.12%
advanced 7.92 points, or 0.1%, to 6,790.71.

What are strategists saying?

The consensus trade on Wall Street has been buying European equities versus U.S. equities, but thats on the condition that Europe is politically stable. When Merkel could not get her coalition, there was a short-lived flight to quality, said Diane Jaffee, senior portfolio manager at TCW.

Jaffee noted that with bond yields so low, or negative in some cases, equities are still attractive for many investors.

Earnings growth, especially revenue growth, continues to support U.S. equities, Jaffee said.

Market sentiment has grown less positive in recent weeks, with investors more concerned about tax policy, fuller valuations and a sense of complacency. From a fundamental perspective, investors are also becoming worried about the flattening yield curve and high yield market weakness, which tend to be bearish signals for equities, said Robert Doll, chief equity strategist at Nuveen Asset Management LLC, in his weekly outlook. But we think the two most important drivers of equity markets corporate earnings and real growth levels still support a risk-on investment stance.

Which stocks were key movers?

Shares in Cavium Inc.
CAVM, +10.80%
jumped 11% following news that Marvell Technology Group Ltd.
MRVL, +6.41%
has signed a deal to buy the fellow chip maker for about $6 billion. Marvell gained 6.4%.

Shares of Microsoft Corp.
MSFT, +0.16%
added 0.2%, outperformed other high-profile tech stocks such as Apple Inc.
AAPL, -0.10%
, Facebook Inc.
FB, -0.15%
and Alphabet Inc.
GOOGL, -0.12%
GOOG, -0.07%

Read: This is the most hated, and the most loved, stock among hedge funds

Alibaba Group Holding Ltd.s stock
BABA, +1.55%
rose 1.6% after the e-commerce giant said it would buy a 36% stake in Chinese big-box retailer Sun Art Retail Group Ltd.
6808, -4.00%
for $2.9 billion.

Shares of Delphi Automotive PLC
DLPH, +3.49%
climbed 3.5% after analysts at Bank of America upgraded the stock to buy from neutral.

Cardinal Health Inc
CAH, -4.36%
shares dropped 4.4% after analysts at Morgan Stanley cut the stock to underweight from equal-weight.

What are data saying about the economy?

The leading economic index surged 1.2% in October and suggested no letup in a steadily growing U.S. economy with the end of the year fast approaching.

Read: Fed speeches show readiness to raise rates next month, wariness about recession

What are other assets doing?

The euro
EURUSD, -0.0938%
tumbled to $1.17 after German governmental coalition talks broke down on Sunday, keeping the countrys government in limbo and casting doubt over Chancellor Angela Merkels future as leader.

Read: Germanys Merkel would prefer new election over minority government

The Stoxx Europe 600 index
SXXP, +0.55%
was higher, while the German DAX 30 index
DAX, +0.90%
also gained. In Asian trading hours, the Nikkei
NIK, +0.70%
dropped after the euros slide pushed up the yen
EURJPY, -0.24%
considered a haven in times of economic and political uncertainty.

Oil futures
fell, while gold prices
GCZ7, +0.22%
settled lower, mostly due to a stronger dollar.

The ICE U.S. Dollar index
DXY, +0.05%
was up 0.5%.

Dont miss: The euro still can break higheranalysts react to Germanys political uncertainty

Barbara Kollmeyer and Victor Reklaitis contributed to this report.

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