The Dow ended at another new high after Alcoa announced a takeover bid for rival Alcan, but the overall indexes closed mixed as Wall Street awaits Wednesday's Fed meeting.
"The liquidity and M&A is continuing to drive the market," said Robert Pavlik, chief investment officer at Oaktree Asset Management.
Alcoa , the world's largest aluminum producer, offered $73.25 a share in cash and stock in a hostile takeover attempt of Alcan . Canada- based Alcan said it was considering the unsolicited bid and urged shareholders to wait for a board review.
Stocks traded in a narrow range throughout Monday's trading session as investors appeared hesitant heading into Wednesday's Federal Reserve meeting on interest rate policy.
"I think investors are a little bit cautious heading into that," said Pavlik. "You wonder whether or not (the rally) is getting a little long in the tooth or if it's just the Fed that is on people's minds. It's hard to say."
"Obviously no one is expecting a change in rates, but the language coming afterward is going to be the challenge for the markets," said Alan Gayle, senior investment strategist for Trusco Capital Management.
Buying was across the board with all S&P 500 sectors trading higher. Materials was the best performer, bolstered by the Alcoa news. Energy, which had been the only declining sector, turned positive after oil bounced off of a 6-week low.
Billionaire investor Warren Buffet, who heads Berkshire Hathaway insurance and investment company, said he would like to buy a "huge" business. The 76-year old Buffett also said he might hire up to four people to succeed him as chief investment officer of Berkshire Hathaway and cautioned that recent strong results from the company's insurance operations were unsustainable.
Dutch bank ABN Amro said it received a $24.5 billion offer for its U.S. unit LaSalle from an investment consortium led by the Royal Bank of Scotland. The bid trumps a $21 billion offer from Bank of America.
ABN said the offer is not superior to Bank of America's bid, due to certain conditions related to the latest offer, but will hold special meeting of shareholders to vote on the proposal, which could derail ABN's proposed merger with Barclays.
In other merger news, shares of Armor Holdings rose more than 5% after British defense contractor BAE Systems said it would buy the body armor and Army truck maker for $4.1 billion.
New York light sweet crude futures fell to a 6-week low, trading below $62 a barrel. Oil prices bounced off of their lows after the U.S. Energy Secretary said oil supply remains adequate and that the problem now is refinery bottlenecks.
Europe Closes Modestly Higher, Asia at New Highs
It was a record-breaking Monday in Asia with stocks rallying to lift Australia, Hong Kong, Singapore and South Korea to new peaks. European shares ended with modest gains.
In Paris, the CAC-40 closed just above the flatline after the French elected conservative Nicolas Sarkozy as president. Sarkozy was seen as the candidate most friendly to big business, but the market was also expecting him to win, limiting any effect on shares.
The DAX closed modestly higher in Frankfurt as sports apparel company Puma saw shares decline after cutting its full-year sales outlook.
The Nikkei 225 Average closed over 1.5% stronger to its highest close in more than three weeks, with technology shares such as Canon advancing following gains in their U.S. peers and helped by a softer yen. TDK climbed more than 2% after the company said it planned to spend 50 billion yen to build a new ceramic capacitor plant.
South Korea's Kospi Index finished at a record high and was close to breaching the 1,600 level, as a stronger global market boosted exporters such as Samsung Electronics, while shipbuilders rallied as they continued to announce new orders.
Australia's S&P/ASX 200 Index ended higher, setting its fourth straight closing peak, as new
records for base metal prices and takeover talk boosted the top miners such as BHP Billiton and Rio Tinto, while take-over target Rinker Grouprose on hopes that the Cemex bid for the firm will sail through. All eyes were on Qantas, whose shares were suspended, after a $9 billion takeover bid failed. The buyout group, Airline Partners Australia, said it was considering launching a new offer for the airline.
Hong Kong stocks struck a record high as property stocks rallied further before a government land auction on Tuesday, while PetroChina led a jump in China shares.
Singapore stocks rose to an all-time high, led by gains in Southeast Asia's top lender, DBS Group, but reversed course later in the day to finish lower.