U.S. stocks headed for a second straight day of gains on Monday, boosted by AIG's deal to sell a unit for $35.5 billion and efforts to solve Greece's debt problems, which have clouded the outlook for global recovery.

American International Group Inc jumped 6.6 percent to $26.41 after Britain's Prudential Plc
agreed to buy its AIA Group insurance arm of Asia for $35.5 billion. Other merger and acquisition news helped boost sentiment.

The market always loves merger and acquisition activity because it means people or other companies are finding value out there in the market place, said Scott Marcouiller, senior equity market strategist at Wells Fargo Advisors in St. Louis, Missouri.

There were also some positive signs from the economy after disappointing data last week. U.S. consumer spending increased slightly faster than expected in January while the U.S. manufacturing sector grew, bolstering the view the economy is recovering modestly.

The Dow Jones industrial average <.DJI> gained 75.73 points, or 0.73 percent, to 10,400.99. The Standard & Poor's 500 Index <.SPX> added 10.55 points, or 0.96 percent, to 1,115.04. The Nasdaq Composite Index <.IXIC> rose 34.38 points, or 1.54 percent, to 2,272.64.

Helping Nasdaq, SanDisk Corp climbed 11.1 percent to $32.38 after the flash memory maker raised its revenue forecast for the first quarter late Friday and said the outlook for the industry in the coming years is strong. The PHLX Semiconductor index <.SOXX> added 3.1 percent.

Stocks have been strong recently, with the S&P 500 rising for seven of the last ten sessions.

It's been a pretty good mix of groups today, so you've had strong underlying leadership too, and the rally has been quite broad, said Marcouiller.

The S&P 500 is now off only 3 percent from a 15-month closing high reached on January 19. It had fallen by more than 8 percent from the peak through February 8.

Adding to Monday's gains were signs that Athens might be nearing a deal with European Union governments for some form of emergency aid. U.S.-listed shares of National Bank of Greece rose 2.1 percent to $3.94.

Millipore Corp surged 11.2 percent to $104.95 a day after Germany's Merck KGaA agreed to buy it for about $6 billion in cash.

The NYSE Arca Biotech index <.BTK> jumped 5.4 percent, led by OSI Pharmaceuticals Inc , which advanced 51 percent to $55.90 after Japan's Astellas Pharma Inc <4503.T> launched a $3.5 billion hostile bid for the company.

Data from the Institute for Supply Management showed the U.S. manufacturing sector grew in February, though the pace was slower than economists polled by Reuters forecast.

Government data showed U.S. consumer spending increased slightly faster than expected in January as consumers dipped into their savings while incomes rose slightly.

(Editing by Kenneth Barry)