US STOCKS-Wall St gains, M&A provides a lift

* Indexes have fallen for two straight weeks

* Alcoa (NYSE: AA - news) to buy RTI International for $1.5 bln

* GM (NYSE: GM - news) shares rally, to launch buyback program

* Indexes up: Dow 0.4 pct, S&P 500 0.2 pct, Nasdaq 0.1 pct (Updates to market open)

By Ryan Vlastelica

NEW YORK, March 9 (Reuters) - U.S. stocks were modestly higher on Monday, a day after the S&P 500's biggest drop in about two months, as some billion-dollar deals helped provide a lift to the market.

Wall Street has fallen for two straight weeks, a downtrend that came on speculation that interest rates could rise sooner than anticipated. Friday's weakness was driven by a much stronger-than-expected jobs report, which was seen as possibly pressuring the Federal Reserve to act soon on monetary policy. The central bank had said it would raise rates when the economy was strong enough to support such a move.

While a more robust economy is better for stocks in the long run, investors have been concerned that a rate rise too soon - which would raise borrowing costs for companies and individuals - could dampen growth as the economy's recovery has been slow.

The S&P 500 remains about 2 percent below its record closing high. The Dow is also near record levels, while the Nasdaq is 2.4 percent below its record close, hit in March 2000.

In deal news, Alcoa Inc said it would buy RTI International Metals Inc for $1.5 billion. Simon Property Group offered to buy Macerich Co for $22.4 billion.

Alcoa lost 4.9 percent to $13.77 while RTI jumped 40.5 percent to $38.33. Macerich rose 5.9 percent to $91.86 while Simon Property (NYSE: SPG - news) was up 0.5 percent at $181.51.

"You'll see these kinds of deals continue to be announced since money is so cheap right now that you can borrow all you need to make them happen," said Tom Mangan, who helps oversee $6.4 billion as a senior vice president at James Investment Research Inc in Xenia, Ohio.

"This will be very good for small-cap stocks, and it also suggests that the market isn't overly expensive overall."

Whiting Petroleum Corp (NYSE: WLL - news) rose 9.6 percent to $37.35. Late Friday, the Wall Street Journal reported that the company was seeking a possible buyer, though a person familiar with the board's thinking told Reuters he was not aware of any such plan.

McDonald's Corp same-store sales fell more than expected in February, though the stock rose 0.9 percent to $98.

General Motors said it plans a new, $5 billion share buyback in an agreement with dissident investors, and put forward more details on capital allocation that promises investors the potential for further cash returns. Shares (Berlin: DI6.BE - news) rose 3.3 percent to $37.74.

At 9:58 a.m. (1358 GMT), the Dow Jones industrial average rose 72.22 points, or 0.4 percent, to 17,929, the S&P 500 gained 3.91 points, or 0.19 percent, to 2,075.17 and the Nasdaq Composite added 6.31 points, or 0.13 percent, to 4,933.68.

Advancing issues outnumbered declining ones on the NYSE by 1,688 to 1,070, for a 1.58-to-1 ratio; on the Nasdaq, 1,352 issues rose and 972 fell, for a 1.39-to-1 ratio favoring advancers.

The S&P 500 was posting 5 new 52-week highs and 7 new lows; the Nasdaq Composite was recording 26 new highs and 23 new lows. (Editing by Bernadette Baum and Nick Zieminski)