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Update: Stocks climb on upbeat earnings, economic reports

NEW YORK (AP) -- Stocks rose sharply early today following upbeat earnings reports and a fresh round of corporate dealmaking.

European markets also rose following new plans by European Union leaders to push Greece to get its budget under control. European leaders on Monday said Greece will have another month to come up with a plan to cut its deficit.

Kraft Foods Inc. and apparel retailer Abercrombie & Fitch reported earnings that beat expectations, while drugmaker Merck & Co. said profits jumped after the company bought its longtime partner Schering-Plough Corp.

Earnings reports over the past month have mostly come in better than expected, but problems in the global economy have pushed the market lower in recent weeks. With the Greek debt crisis now starting to ease, investors' focus may return to the U.S. economy.

Meanwhile a bold acquisition move by the nation's largest mall owner raised hopes that businesses are feeling more confident about the economy.

Simon Property Group has offered to acquire its ailing rival, General Growth Properties, for $10 billion. General Growth, the No. 2 mall operator, filed for bankruptcy protection last year.

In early afternoon trading, the Dow Jones industrial average rose 123.57, or 1.2 percent, to 10,222.71. The Standard & Poor's 500 index rose 14.12, or 1.3 percent, to 1,089.63, while the Nasdaq composite index rose 22.54, or 1 percent, to 2,206.07.

Nearly four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 356 million shares, compared with 376.5 million shares traded at the same point Friday.

Energy and materials stocks rallied as commodities prices rose. Gold and oil both rose sharply.

Economic reports throughout the holiday-shortened week will also provide insight into the economy. The market was closed Monday for President's Day.

A report on manufacturing in the New York area was stronger than expected. The Empire State manufacturing index rose to 24.91 this month, compared with a forecast of 18, according to economists polled by Thomson Reuters. The index was 15.92 last month.

The industrial sector has shown growth in recent months, adding to hopes that the economy is on a path to a sustained recovery.

Reports on housing starts, jobless claims and inflation are all due out later this week.

Merck was one of the biggest gainers of the 30 stocks that make up the Dow Jones industrial average, rising $1.05, or 2.8 percent, to $37.97. In addition to its earnings results Merck also announced details of the combined company's restructuring plans, the first phase of which expected to bring annual savings of up to $3 billion in 2012.

Simon Property rose $1.56 or 2.2 percent to $73.56 after announcing its hostile offer for General Growth. General Growth's best known centers include the Glendale Galleria in Southern California and the South Street Seaport in Manhattan.

Bond prices edged lower after a report showed foreign demand for U.S. government bonds fell by the largest amount on record in December. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.72 percent from 3.70 percent late Friday.

The dollar fell.

The Russell 2000 index of smaller companies rose 5.39, or 0.9 percent, to 616.11.

Overseas, Britain's FTSE 100 rose 1.5 percent, Germany's DAX index gained 1.5 percent, and France's CAC-40 rose 1.7 percent. Japan's Nikkei stock average rose 0.2 percent.