Shares on Wall Street rose along with oil prices on Monday as acquisition news and hopes of progress in Europe's debt crisis prompted investors to buy up assets cheapened by last week's rout.
News that Google Inc offered to buy Motorola Mobility Holdings Inc for about $12.5 billion in cash fueled a rebound in U.S. stocks for a third straight session.
Global equities climbed further out of their August hole on news that Japan's economy shrank less than anticipated in the second quarter as companies made strides in restoring output following a devastating earthquake and tsunami.
"The Japanese news, while not overly encouraging, was another data point showing things are not nearly as bad as the sell-off seemed to suggest," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.
"This is an extremely jittery market, just looking to avoid significant bad news," he said. "I would expect there to be less volatility than we saw last week."
The dollar's drop to a three-week low against the euro, at $1.44779, lent support to commodities. U.S. crude oil rose two percent, touching a session peak just below $87.50 per barrel.
The euro rose on expectations of a positive outcome of Tuesday's meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel to discuss Europe's debt crisis.
The single currency was also lifted by news that the European Central Bank spent 22 billion euros to buy government debt last week to stem the spread of the debt crisis to Spain and Italy. It was the most the ECB had spent in a week on such purchases since it began buying debt in May 2010.
U.S. stocks were trading higher. Just after one p.m. EDT, the Dow Jones Industrial Average was up 150.08 points, or 1.33 percent, at 11,419.10. The Standard & Poor's 500 Index added 17.87 points, or 1.52 percent, at 1,196.68. The Nasdaq Composite Index was up 25.78 points, or 1.03 percent, at 2,533.76.
The S&P 500 fell to a near one-year low last week, as markets tumbled initially on the first-ever U.S. credit ratings downgrade and fears that Europe's debt woes may spread. They then rebounded with almost equal force, rising more than six percent over the last three sessions.
Monday's move higher came despite a gauge of manufacturing in New York State falling for a third month in a row in August as factory orders hit their lowest level since November 2010, the New York Federal Reserve said.
"The corporate sector has become the most important buyer of U.S. equities right now," said Doug Cliggott, managing director of U.S. equity strategy at Credit Suisse. "Some really good value was created by (last week's) downdraft."
Separate data from the U.S. Treasury Department showed foreigners unloaded U.S. assets in June for a second straight month and were net sellers of Treasury securities for the first time in more than two years as concern about a U.S. credit downgrade soured overseas demand.
MSCI's all-country world stock index, a broad measure of global equities, was up 1.6 percent, ratcheting up a seven percent gain since hitting an 11-month low on Thursday. European stocks rose 2.3 percent.
Most U.S. Treasuries prices were stable, while long bond prices dropped as stocks recovered and investors looked for signs of stability after last week's volatile stocks sent buyers scurrying to U.S. government debt.
The benchmark 10-year U.S. Treasury note was down 4/32, with the yield at 2.2743 percent.