The return of "Merger Monday" on Wall Street temporarily helped ease worries about the U.S. economy. A report showed that manufacturing in New York has worsened in August for the third straight month.
About 30 minutes after trading began, the Dow Jones industrial average rose 115 points, or 1 percent, to 11,385. The S&P 500 index rose 13, or 1.2 percent, to 1,193. The Nasdaq composite index rose 23, or 1 percent, to 2,532.
The biggest deal announced on Monday was Google Inc.'s $12.5 billion cash purchase of wireless phone maker Motorola Mobility Holdings Inc. It is also the biggest acquisition in Google's history. No. 2 is its $3.2 billion purchase of DoubleClick in 2008. Motorola Mobility's stock jumped percent 56 percent. Google fell 0.7 percent.
Time Warner Cable Inc. said it will pay $3 billion in cash for Insight Communications Co., which has more than 750,000 cable customers in the Midwest. In the energy industry, offshore driller Transocean Ltd. said it will buy Aker Drilling of Norway for $1.43 billion in cash.
Companies across the United States have a record amount of cash that they have accumulated since the recession ended. They have increased their cash reserves every quarter for more than two years, and businesses in the S&P 500 index had a total of $963.3 billion at the end of March, according to the most recent data from Standard & Poor's.
Investors have been waiting for them to use some of that cash on acquisitions, dividend increases and stock buybacks. Many financial analysts believe that companies are more confident about the future if they're willing to buy other businesses. So a series of acquisition announcements tends to send stocks higher.
The growing cash hoard has been the result of stronger profits. Companies have kept costs low by being slow to hire. Revenue, meanwhile, is growing, particularly from overseas customers. For the 460 companies in the S&P 500 that have reported second-quarter results, total earnings are up 12 percent from a year ago.
Some companies are looking to pare back. Bank of America Corp. said it will sell its $8.6 billion Canadian credit-card business to TD Bank Group. The Charlotte, N.C.-based bank will also get out of the credit card business in Britain and Ireland. The deals follow others that the bank made to move out of foreign credit cards, and they should help Bank of America improve its balance sheet
Bank of America rose 2.8 percent.
Asian and European markets rose earlier Monday after Japan said its economy shrank at just a 1.3 percent annual rate between April and June. That's less than half the drop that economists expected following the earthquake, tsunami and nuclear crisis that struck the country in March.
Still, investors have more reason to worry about the weak U.S. economy.
Manufacturers in New York told the Federal Reserve that they're more pessimistic about future growth. Manufacturing has been one of the country's strongest industries since the recession ended in 2009, but growth began to slow in March. Manufacturing nationwide barely grew in July.
Cosmetics company Estee Lauder Cos. fell 9.2 percent after it forecast earnings for the upcoming year that were below Wall Street's expectations. It also said its net income rose 72 percent last quarter on strong sales growth to China, Russia and the Middle East.
Lowe's Cos., the second-largest home improvement retailer, fell 0.7 percent after said its net income was roughly flat last quarter on a 1 percent rise in revenue.
Last week, the Dow rose or fell by at least 400 points for four days straight. It was the first time that had ever happened. The S&P 500 index also rose or fell by 4 percent for four straight days. It's the first time that happened since November 2008, at the depths of the financial crisis.