Stocks headed for a third straight day of gains on Tuesday as investors drew cheer from more mergers and acquisitions and signs of progress in securing European financial backing for Greece.

Tuesday's advance briefly pushed the Dow index into positive territory for 2010, a day after both the S&P 500 and Nasdaq indexes moved above the break-even mark for the year.

A day after American Insurance Group announced a record-breaking deal to sell a major Asia insurance unit, corporate deal announcements continued, as fertilizer maker CF Industries Holdings Inc raised its hostile bid for Terra Industries Inc, and Dow Chemical Co said it will sell one of its units that makes latex, rubber and related plastics to private equity firm Bain Capital Partners.

More deal making is a sign that the financials markets are normalizing and the economy improving.

When you see M&A activity it's an indication that market participants see value out there, said Jim Maguire Jr., a trader at EH Smith Jacobs, in New York. The very fact that we are talking about M&A these days, I think, is a huge positive for the market.

Greece's borrowing costs fell to their lowest level in weeks as its government is expected to announce new austerity measures to win European debt guarantees for the cash-strapped European Union member.

The Dow Jones industrial average <.DJI> gained 32.04 points, or 0.31 percent, to 10,435.83. The Standard & Poor's 500 Index <.SPX> added 6.54 points, or 0.59 percent, to 1,122.25. The Nasdaq Composite Index <.IXIC> rose 15.92 points, or 0.70 percent, to 2,289.49.

The S&P 500 has risen for 8 of the last 11 trading days. The benchmark index is now off 2.4 percent from a 15-month closing high reached on January 19 after falling more than 8 percent through February 8.

The Chicago Board Options Exchange Volatility Index <.VIX>, Wall Street's favorite measure of investor anxiety, fell more than 3 percent to 18.64.

CF Industries Holdings raised its offer to $47.40 per share in cash and stock, sending Terra Industries' shares up 11.2 percent to $45.80. CF shares shed 2.4 percent to $104.96.

Dow Chemical Co said it would sell its Styron basic plastics unit to Bain Capital Partners for $1.63 billion. Dow shares were up 1 percent at $29.93.

Ford Motor Co posted a 43 percent surge in February U.S. auto sales and set higher North America production targets for the second quarter. The stock rose 0.6 percent to $12.49.

General Motors Co posted a nearly 12 percent gain in U.S. February sales, but that was weaker than some analysts had expected.

On the Nasdaq, technology bellwether Qualcomm Inc , rose more than 7 percent to $38.25 after the company announced a new $3 billion share buyback plan and raised its quarterly dividend by 12 percent.

Shares of Sequenom Inc jumped 19.2 percent to $8.25 after Cantor Fitzgerald upgraded the firm and raised its price target to $16 from $4.

UBS raised its 2010 estimate for global semiconductor company revenue growth, saying the first quarter appeared to be tracking ahead of seasonal trends, with strong personal computer sales that should continue to support demand for DRAM microchips.

The PHLX Semiconductor index <.SOXX> rose 0.8 percent.

(Reporting by Edward Krudy; Editing by Padraic Cassidy)