Stocks posted modest gains across the board--with financial, technology and energy stocks showing strength.
Stocks were generally off their intra-day highs, but the market extended its overall gains.
The Dow Jones Industrial Average closed higher, as did the Nasdaq and the S&P 500 .
On the New York Stock Exchange, advancers led decliners 1,950 to 1,358 with 123 stocks unchanged. On the Nasdaq, advancers led decliners 1,533 to 1,499 with 151 issues unchanged.
Caution prevailed ahead of Tuesday's Federal Open Markets Committee meeting. Most analsyts expect the nation's central bank to leave its target rate for overnight loans unchagned at 5.25%. The Fed raised rates 17 times in a row starting in June 2004 in an effort to choke off inflation, but has left the rate unchagned since August.
Crude oil futures gained nine cents a barrel on the New York Mercantile Exchange to $61.31.
M&A news drove the markets in Europe and early in the session in the U.S. and some analysts believe the deal-making will continue (Play-By-Play: Conditions Right For More Merger Mania).
"I think the world is awash with cash," said Jason Trennert, Chief Investment Strategist for Strategas Research Partners, appearing on CNBC's "Power Lunch." "If you look at certain sectors like energy, healthcare or technology, they have doubled the amount of cash on their balance sheets than they had 10 years ago. Also, the amount of money that's being raised by private equity funds, I think, is going to continue."
Shares of travel company Sabre Holdings rose on a Wall Street Journal report that it is expected to be sold this week, likely to private equity groups. Sabre is the owner of the Travelocity Internet travel service.
Shares of Smith & Nephew rose in London trading after a report that the biggest medical device company in Europe is close to making an $11 billion takeover bid for U.S. company Biomet , which also rose on the news. Smith & Nephew said last month it held preliminary talks with Biomet, but the company could face competition from other big medical device companies like Johnson & Johnson and Zimmer Holdings , according to Reuters.
Shares of Dow component Dupont rose after the company upped its full-year earnings guidance to $3.25 per share from $2.86. The company also announced restructuring plans for its agriculture and nutrition division, resulting in the loss of 1,500 jobs worldwide.
Coca-Cola Company has no intention of acquiring the remainder of Coca-Cola Enterprises, according to the newly-appointed COO, Muhtar Kent. He said the company would grow by targed acquisitions, but was not planning to add to its 40% stake in its largest bottler.
Dubai Ports said it has agreed to sell its U.S. port operations to a unit of American International Group following concerns about national security. DP World told Reuters that it will conclude the deal with AIG Global Investment Group in the first quarter.
More Upside Possible
Some analysts believe more upside is possible for stocks for the remainder of this year and into 2007.
"I think there's a lot of people that have been left behind by this rally, so I wouldn't be suprised to see one or two more percent this year," said Phil Dow, Director of Equity Strategy for RBC Dain Rauscher, appearing on CNBC's "Squawk on the Street."
"The market's been pricing in a soft economic landing for some time and it's starting to price in the potential of the Fed actually easing and profit growth potentially growing 10% again next year," said Nick Raich, Director of Research at National City Private Client Group, appearing on CNBC's "Morning Call."
The Nasdaq has announced its annual reshuffling of the Nasdaq-100 index. Level 3 Communications , Infosys Technologies and Vertex Pharmaceuticals are joining the index. JDS Uniphase Corporation , Lincare Holdings and Urban Outfitters will be removed. The changes take effect next Monday, December 18th, at the market open.
Deals Fuel European Gains
Weakness in the euro and more developments in M&A helped European indexes gain. London's FTSE-100 closed modestly higher. The Frankfurt DAX and the CAC-40 in Paris posted healthier gains.
Shares of Anglo-Dutch steelmaker Corus Group rose 5% after the company said it agreed to a takeover offer of 515 pence per share, or $9.6 billion, with Brazil's CSN. Earlier, India's Tata Steel had boosted its bid for Corus by 4.6% to $9.2 billion.
Asia Posts Solid Gains
Tokyo's Nikkei 225 Average closed higher as Honda Motor and other exporters gained on the yen's slip against the dollar, while investors bought shares with high dividend yield such as Nippon Steel and other steel makers. South Korea's Kospi Index closed just a touch higher. The market traded in tight ranges.
Australian stocks finished stronger led by Qantas and bank plays such as Australia & New Zealand Banking Group and National Australia Bank.
Hong Kong's Hang Seng Index made gains on the back of the U.S. jobs report which eased worries about the health of the world's largest economy, while telecoms shares rebounded amid hopes China will issue 3G licenses soon. Singapore stocks finished higher, led by Genting International and Star Cruises which soared after the two firms won the bid to build and run a $3.38 billion casino in Singapore.