Stocks rose on Monday, boosted by AIG's deal to sell its Asian life insurance unit and prospects for solving Greece's debt problems, which have increased fears about the outlook for global recovery.

American International Group Inc jumped 6.6 percent to $26.40 after Britain's Prudential Plc
agreed to buy its AIA Group insurance arm for $35.5 billion. Other merger and acquisition news helped boost sentiment.

M&A activity is always good for the markets, but especially with AIG, since if they raise money, that raises the odds of getting some TARP payback, which is a positive no matter how you view it, said Mark Pado, market strategist at Cantor Fitzgerald & Co in San Francisco.

The government's Troubled Asset Relief Program purchased assets and equity from troubled institutions to strengthen the financial sector during the credit crisis.

The Dow Jones industrial average <.DJI> rose 59.18 points, or 0.58 percent, to 10,384.89. The Standard & Poor's 500 Index <.SPX> gained 8.65 points, or 0.78 percent, to 1,113.14. The Nasdaq Composite Index <.IXIC> jumped 29.28 points, or 1.31 percent, to 2,267.48.

Stocks have been strong recently, and in February posted their best monthly advance since November on signs of improvement in the economy.

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

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.

Any progress with Greece is definitely a relief for that nagging issue, and you have to give a lot of credit to the consumer spending data since January isn't typically a strong month for that, Pado said.

Millipore Corp surged 11 percent to $104.94 a day after Germany's Merck KGaA agreed to buy it for about $6 billion in cash.

The NYSE Arca Biotech index <.BTK> jumped 5.5 percent, led by OSI Pharmaceuticals Inc , which advanced 53 percent to $56.47 after Japan's Astellas Pharma Inc <4503.T> launched a $3.5 billion hostile bid for the company.

SanDisk Corp climbed 9.9 percent to $32.01 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 2.7 percent.

(Editing by Kenneth Barry)