Stocks closed at 14-month highs on Monday as Abu Dhabi's $10 billion in aid to help Dubai avoid default eased concerns and a takeover deal by Exxon Mobil Corp raised optimism about mergers and acquisitions activity.

Citigroup Inc's plan to repay the U.S. government about $20 billion in bailout funds also helped buttress the buoyant mood a week after Bank of America fully repaid its $45 billion government loan.

Exxon Mobil said it would buy natural gas supplier XTO Energy Inc in an all-stock transaction valued at about $30 billion, excluding debt.

Abu Dhabi said on Monday it will provide Dubai $10 billion in bailout money, with $4.1 billion for payment on a maturing bond.

It certainly eases the strain on European banks and that, in turn, increases confidence in the financial system in general, said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

We've seen in the last 18 months how these things can spiral out, if you will, from what appears to be well contained to envelop firms all over the world.

The Dow Jones industrial average <.DJI> gained 29.55 points, or 0.28 percent, to end at 10,501.05. The Standard & Poor's 500 Index <.SPX> rose 7.70 points, or 0.70 percent, to 1,114.11. The Nasdaq Composite Index <.IXIC> climbed 21.79 points, or 0.99 percent, to close at 2,212.10.

The closing levels for the Dow and the S&P 500 represent 14-month highs, while the Nasdaq ended at its highest level in 15 months.

Citigroup laid out a plan to repay the money it owes the U.S. government, including raising money by selling $17 billion of common stock immediately, as the bank looks to end the restrictions on executive pay that came with the funds.

Citi's stock slumped 6.3 percent to $3.70.

Shares of XTO surged 15.4 percent to $47.86.

In contrast, Exxon Mobil shed 4.3 percent to $69.69 and ranked as the top drag on the Dow.

The NYSE Arca Natural Gas index <.XNG> gained 4.5 percent.

The First Trust ISE-Revere Natural Gas Index Fund , an exchange-traded fund of natural gas companies' shares, rose 5.3 percent. XTO has underperformed that ETF by roughly 14 percent this year.

Sun Microsystems Inc shares jumped 11 percent to $9.28 on Nasdaq after European Union regulators signaled they could clear Oracle Corp's $7 billion takeover of Sun after Oracle promised measures to ease competition concerns. Oracle's stock rose 2.3 percent to $23.31.

Visa Inc shares rose 4.2 percent to $84.77 on the New York Stock Exchange after ratings agency Standard & Poor's said late Friday the credit card company will replace telecommunications equipment maker Ciena Corp in the S&P 500 after the close of trading on December 18.

S&P also said Bristol-Myers Squibb's spin-off, Mead Johnson Nutrition Co , will relace bond insurer MBIA Inc in the S&P 500 on the same date. Mead Johnson shares climbed 1.8 percent to $43.23.

Volume was light on the New York Stock Exchange, with only about 1.07 billion shares changing hands, below last year's estimated daily average of 1.49 billion, while on the Nasdaq, about 1.85 billion shares traded, below last year's daily average of 2.28 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 3 to 1, while on the Nasdaq, about two stocks rose for every one that fell.

(Editing by Jan Paschal)