* Weakness in crude oil again pressures energy names
* Otsuka to buy Avanir; Cypress Semi to buy Spansion
* Biogen rallies on favorable Alzheimer's drug data
* Dow, S&P 500 both up 0.2 pct, Nasdaq up 0.3 pct (Updates to open)
By Ryan Vlastelica
NEW YORK, Dec 2 (Reuters) - U.S. stocks rose modestly on Tuesday as a pair of big M&A deals boosted market optimism and helped the market rebound from the broad decline in the previous session, which was the S&P 500's weakest day in a month.
Energy shares continued to struggle amid ongoing volatility in the price of oil. U.S. crude futures fell 2 percent to $67.58 per barrel, contributing to the 0.5 percent decline in the S&P Energy sector, the worst-performing industry group of 2014. Chesapeake Energy fell 1.3 percent to $19.80 while Devon Energy was off 1.3 percent at $59.14.
Crude is down more than 30 percent from a recent peak, and analysts expect the group's weakness to persist.
"Fourth-quarter earnings estimates for the energy sector are down about 20 percent, which is significant. There's going to be really broad pain when that materializes," said James Liu, global market strategist for JPMorgan Funds in Chicago.
"The broader market should be able to weather this storm, but it will still take a hit."
In the latest deal news, Cypress Semiconductor Corp agreed to buy Spansion Inc in an all-stock deal valued at about $4 billion.
Separately, Otsuka Pharmaceutical Co Ltd said it would buy Avanir Pharmaceuticals Inc for about $3.5 billion.
Cypress rose 17 percent to $12.20 while Spansion was up 22 percent at $27.97 on heavy volume. Avanir added 13 percent to $16.96.
Biogen Idec Inc advanced 6 percent to $327.03 as the S&P's biggest advancing stock on favorable data from the Phase III trial of an Alzheimer's drug.
Digital Ally jumped 25 percent to $16.08 on heavy volume a day after U.S. President Barack Obama urged lawmakers to spend $263 million over three years on 50,000 body-worn cameras and law enforcement training programs as part of federal response to civil rights protests in Ferguson, Missouri.
At 9:48 a.m. (1448 GMT) the Dow Jones industrial average rose 34.45 points, or 0.19 percent, to 17,811.25, the S&P 500 gained 4.14 points, or 0.2 percent, to 2,057.58 and the Nasdaq Composite added 14.74 points, or 0.31 percent, to 4,742.08.
Advancing issues outnumbered declining ones on the NYSE by 1,561 to 1,159, for a 1.35-to-1 ratio; on the Nasdaq, 1,545 issues rose and 683 fell for a 2.26-to-1 ratio.
The S&P 500 was posting 45 new 52-week highs and 1 new lows; the Nasdaq Composite was recording 50 new highs and 39 new lows. (Editing by Nick Zieminski)