Has the Christmas rally begun? The NASDAQ composite is breaking out to new 2009 highs and the Dow Industrials are up triple digits after two components (AA and INTC) were upgraded this morning. It was merger and acquisition news that really set the tone. SNY is buying CHTT and BUCY is buying the mining division from TEX. Overall the U.S. markets are seeing a widespread rally with gold and gold miners bucking the trend with declines thanks to a bounce in the dollar.

Asian markets were mixed. A stronger dollar, weaker yen helped the Japanese NIKKEI post a 0.4% gain. The Chinese Shanghai index ended a four-day losing streak with a 0.29% gain. The Hong Kong Hang Seng broke down under the 21,000 level with its fifth loss in a row thanks to Monday's 1.0% decline.

The atmosphere was bullish in Europe on Monday. Energy and financials helped lead the way. The Confederation of British Industry upgraded their 2010 forecast for growth in the U.K. from +0.9% to +1.2%. The English FTSE rallied 1.8%. The German DAX gained 1.7%. The French CAC-40 climbed 2.0%.

The big deal today was French drug maker Sanofi-Aventis (SNY) offering to buy U.S. healthcare products company Chattem (CHTT) for $1.9 billion. This values CHTT at $93.50 a share and together the two would become the fifth largest consumer healthcare company in the world. Shares of SNY are up 0.3% at $39.26 and CHTT gapped open from $70.00 to $92.79 this morning. In the mining space Bucyrus International (BUCY) offer to buy Terex Corp's (TEX) mining equipment division for $1.3 billion. Shares of TEX spiked toward $21 this morning but failed to breakout past the 50-dma. Investors applauded BUCY with an 8.8% rally toward $55. There was also some M&A news in the automotive world. Previously General Motors (GM) had given up on selling its Saab brand but it looks like Spyker Cars is going to make an offer on the brand.

In the not-so-good news column the Office of the Comptroller and the Office of Thrift Supervision said that mortgage delinquencies are continuing to rise. What analysts find really alarming is the growing number of delinquencies in the prime mortgages, which are supposed to be safer, good-credit consumers. The third quarter of 2009 saw delinquencies in this group jump 20% to 3.6% of all prime mortgages.

Hopefully banks will be able to earn their way past the coming rise of foreclosures. The yield curve is certainly helping them out. This morning the difference between the 2-year and 10-year yields hit an all-time high of more than 281 basis points. This means the profit margins on bank lending is huge if they're lending.

One of the best performing sectors today is healthcare. The HMO healthcare index is up 2.8% and hitting new 2009 highs on news that the current healthcare bill is closer to getting passed. Over the weekend it was big news that Senate Democrats came up with the exact 60-40 margin they needed to shut down a GOP filibuster on the bill. This was only possible after Democrats essentially bought the vote from Nebraskan Senator Ben Nelson for special kickbacks for Nebraska. Sadly he's not the only senator that negotiated special deals for their states for a "yes" vote on this healthcare bill.

A rise in the dollar is putting pressure on commodities. Gold is down about 1% and broke under the $1,100 an ounce level this morning. Meanwhile crude oil spiked higher this morning but those gains are fading. Iraq had to shut down a pipeline to Turkey after an explosion damaged the line. In Nigeria the rebels have broken a five-month peace with a new attack on the country's oil infrastructure.

Currently the S&P 500 index is up 1.0% and trading near the top of its trading range around the 1114-1115 level. The Dow Industrials are up close to 100 points and trading near 10,430. The NASDAQ composite has broken higher and hit new highs for the year with a 1.0% gain. More importantly the NASDAQ has produced a bullish breakout from a bearish consolidation pattern. This could fuel some additional short covering. The small cap Russell 2000 index is up 1.1% and hitting new two-month highs over 617.

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

After a quick look at the OptionInvestor.com play list I see that stocks are mostly higher but gains are relatively mild. WHR is showing some relative strength with a 2.9% gain to new 2009 highs.