Good news out of Japan regarding the country's efforts to cool nuclear reactors and a return of Merger Monday helped the market overlook what is a deteriorating situation in Libya as stocks spent a third consecutive in rally mode. The S&P 500 and the Dow Jones Industrial Average both jumped 1.5% while the Nasdaq added 1.8%.

Stats Table

Overall, Monday's headlines were positive for the most part, but there was some gloomy news and it came courtesy of the housing sector (where else?). I will start with this so the bad news is out of the way first. The National Association of Realtors said existing home sales in February fell to 4.88 million units on a seasonally adjusted basis.

That is well below the 5.4 million units seen in January's upward revision and the 5.02 million units in February 2010. Remember that economists usually say a reading of 6 million units is positive. Making matters is the fact that the median home price fell to its lowest level in nine years last month.

For those looking for something positive out of this report, NAR says existing home sales remain 26.4% above the cyclical low seen last July and that first-time buyers accounted for 34% of purhases last month. Still, NAR says ''unnecessarily tight credit'' is hampering the housing market. On that note, I offer this anecdote: A friend of mine, who has good credit and makes over $100,000 per year, recently tried to purchase a home here in Southern California for $399,000. He went to Bank of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC) with an $80,000 down payment and was rejected for a mortgage by all three.

Home Sales Chart

Mergers and acquisitions news was in full bloom today and I will get into the big deals of the day in the minute, but it is worth noting that just week a removed from the announcement that Berkshire-Hathaway (BRK-A, BRK-B0 will acquire Lubrizol (LZ) for $9 billion, Warren Buffett was providing life to the markets again by saying he is still on the hunt for more big deals. Buffett is currently in South Korea and called the country a ''hunting ground'' for acquisitions. Buffett already holds a stake in South Korean steelmaker Posco (PKX), though that name was not specifically mentioned as a possible Berkshire target.

The big deal of the day was actually announced on Sunday when Dow component AT&T (T), currently the second-largest wireless carrier in the U.S., said it will acquire Deutsche Telekom's T-Mobile USA business for $39 billion in cash and stock. The deal will allow AT&T to surpass Verizon's (VZ) Verizon Wireless business to become the largest U.S. mobile phone carrier.

AT&T will add 34 million new subscribers, but that is of course assuming none of them leave for Verizon or other competitors. No surprise here: The deal, which is the largest in the wireless business since 2004, could face heavy antitrust scrutiny as it combines the second- and fourth-largest U.S. wireless providers, according to Bloomberg News. In its statement, AT&T cautioned that regulatory approval could take up to a year to win.

Still, AT&T CEO Randall Stephenson said he is confident his company will win approval for the deal. Purchasing T-Mobile represents AT&T's biggest acquisition since the 2003 deal to acquire Bell South for $83 billion.

As is usually the case in the financial markets, there are clearly winners and losers with this deal. Deutsche Telekom is clearly a winner. The company has had some issues with execution in the U.S. and will retain in an 8% in T-Mobile after the deal is completed so it can potentially benefit from AT&T's hard work.

Clearly, Apple (AAPL) is a winner, too. AT&T lost its exclusive rights to the iPhone and analysts are expecting Verizon to sell 11 million iPhones this year, but T-Mobile never had access to the iPhone partly because Apple never wanted to make a version of the phone that operates on T-Mobile's 3G network. It is safe to assume some of these T-Mobile customers want an iPhone and Apple will not need to do any work to convert them. Again, AT&T is doing the legwork by making this deal.

Sprint (S) is clearly the loser here. The company had been trying to acquire T-Mobile itself, but the two sides could never come to terms on valuation. Now Sprint is destined to be the smallest U.S. wireless carrier and they do not even have access to the iPhone. Shares of Sprint lost 13.6% today.

AT&T agreed to a $3 billion breakup fee if the deal fails to go through, Bloomberg reported, citing two sources with knowledge of the matter.

AT&T Chart

The AT&T/T-Mobile is a deal I expect will have some impact on more than a few readers, but another acquisition that was announced on Monday is one that I suspect is also noteworthy to Option Investor readers. Charles Schwab (SCHW), the largest U.S. discount broker, is looking to beef-up its options trading offerings and its $1 billion acquisition of optionsXpress Holings (OXPS) certainly helps accomplish that objective.

While Schwab has been active in the past 18 months or so in terms becoming a player in the ETF business, the company has not made an acquisition of note in about 10 years. As I am sure you know, options volume on U.S. exchanges has been soaring in recent years and Schwab's all-stock deal to acquire optionsXpress is viewed as a move by the company to attract and keep more of the savvy investors that generate more brokerage commissions through active trading. The company currently gets about 10% of its daily average revenue trades from the options arena.

The deal values optionsXpress at a 17% premium to where the stock closed on Friday. Under the terms of the transaction, optionsXpress investors will trade each of their shares for 1.02 shares of Schwab. California-based Schwab is expected to issue 60 million new shares for the deal that is slated to close in third quarter.

optionsXpress had 379,000 client accounts and $7.9 billion in client assets at the end of last year; Schwab had nearly 8 million accounts and $1.6 trillion in assets, according to Reuters. This deal is easily summarized: Options traders have triple the assets and trade six times more often than other clients, Reuters cites Schwab as saying.

optionsXpress Chart

In other M&A news, and I admit this is from Friday, but I think the deal is not getting much attention, General Mills (GIS), the second-largest U.S. food company, is now in exclusive talks with French private equity firm PAI Partners to acquire 50% of Yoplait. General Mills confirms is in said talks on its Web site though does not give a price tag. Several reputable press agencies have reported $1.1 billion is what Big G is offering for the world's second-largest yogurt brand.

Minnesota-based General Mills already distributes Yoplait here in the U.S. and I mention the deal for a couple of reasons, not the least of which is the difficulty foreign firms face when trying to acquire French companies. Sodiaal, which owns the other half of Yoplait, will retain that stake and the French government has been vocal in its desire to see another French firm at least gain part of the stake that PAI is looking to part with.

General Mills reports earnings on Wednesday before the open, another reason I mention the deal, and perhaps we will get an update on the Yoplait news then. Full disclosure: I am long General Mills.

General Mills Chart

In today's ''putting lipstick on a pig'' segment, there is Citigroup (C). Several of Citi's big rivals made headlines by announcing the dividend increases investors had been clamoring for from bank stocks. Citi was not conspicuous by its absence because CEO Vikram Pandit had previously said 2012 would be the year his company started to return capital to shareholders.

So imagine the market's surprise when Citi announced it will begin paying a dividend of a penny a share later this year. That's not all. Citi is pulling an AIG (AIG) and implementing a 1-for-10 reverse split on May 6. The split makes sense as there are nearly 30 billion Citi shares outstanding, though I remember opining about the AIG reverse split a while back and that stock was hammered following the split. Only time will tell if the same fate awaits Citi.

As for the dividend, something is better than nothing, but at just one cent a quarter, the yield on Citi shares will be just 0.09%, the third-lowest dividend yield among S&P 500 dividend stocks, according to Bloomberg News. As one who is long Citi, I am not sure what to make of this news, but as the Wall Street Journal notes, there are probably a few high-frequency traders out there that are less than happy about the reverse split.

Citi Chart

Looking at the charts, the S&P 500 could only manage a flirtation with 1300 today, showing that area has probably become psychological resistance. When the index moved above 1275 last Friday, that became intraday support and I think the lifespan of that support level has now been extended. Today's close above 1290 should be a small positive, but put me in the cautious camp because it sure looked like the market glossed over Libya and rising oil prices today.

S&P 500 Chart

A somewhat similar situation can be found with the Dow as the close above 12,000 may be a good sign, but there is plenty of resistance just 40-50 points away from Monday's close and then again just over 12,200. If the Dow retreats again, I am watching 11,800 to see how strong that support is, though I have a feeling a firmer floor can be found at 11,600.

Dow Chart

As for the Nasdaq, I'd like to see a close over 2700, before I start becoming intrigued, but the move above 2690 today could be a start and support should be found at 2675. There is still Japan-related headline risk here and I do not want to rain on anyone's parade, but I happened to see some pictures of Apple CEO Steve Jobs on the Web last week and he did not look well. These photos were taken and published by reputable sources and I think it goes without saying Jobs' health is an issue tech investors need to be mindful of, if they are not already.

Nasdaq Chart

To be sure, the market has proven resilient over the past few days. That was certainly case on Monday when it appeared that news out of Libya was all but ignored. On Saturday, Shokri Ghanem, chairman of Libya's National Oil Corp. said that Libyan output is plunging and I feel like the only reason I know about this is because I wrote a news article about it for OilSlick, which you can register for (HERE).

Point is, Libya is still an issue to contend with though I get the feeling the news flow out of Japan has taken a turn for the better. Perhaps that will be enough to lead the market higher this week.