Stocks rose for a third day on Monday as investors bought shares whose prices have been beaten down in recent weeks and as news of U.S. deals lifted sentiment.
Weeks of volatility have battered the S&P 500, which is down 12.6 percent since its April 29 highs.
The market has become what technicians call oversold a week or so ago, and we're seeing a bit of a bounce from those levels, said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.
While the overall trend should remain lower, levels of volume, volatility, breadth and sentiment were signaling a bounce, said John Kosar, director of research at Asbury Research in Chicago.
Until those extremes get unwound, the market is likely to carry a bid for the near terms, Kosar said.
Volume was at 4.84 billion shares in afternoon trading, which was below the average last week.
Among the day's biggest gainers, Motorola Mobility Holdings Inc jumped 56 percent to $38.18 on Google Inc's offer to buy the company for about $12.5 billion in cash. Google dropped 2.2 percent to $551.43.
U.S.-traded shares of other companies in the cell phone sector rose, possibly on speculation they also may be takeover targets. Blackberry maker Research in Motion rose 7 percent to $26.44 and Nokia jumped 14.55 percent to $6.14
Among top-performing sectors, the S&P financial index rose 2.4 percent. Shares of Bank of America Corp shot up 7.5 percent to $7.73 after it said it plans to sell its credit card business in Canada to TD Bank Group, part of a plan to shed assets.
Shares of Lowes Cos Inc were up 0.2 percent at $19.55 after reported weaker-than-expected quarterly sales and cut its fiscal-year outlook for the second time in three months.
A meeting on Tuesday by French and German political leaders was expected to result in initiatives needed to restore confidence in credit and other markets.
The Dow Jones industrial average was up 150.72 points, or 1.34 percent, at 11,419.74. The Standard & Poor's 500 Index was up 17.60 points, or 1.49 percent, at 1,196.41. The Nasdaq Composite Index was up 24.53 points, or 0.98 percent, at 2,532.51.
Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas, said the deal news shows a certain confidence in the market.
But he expects volatility to remain in the market.
Europe has been extraordinarily slow in taking any sort of decisive action to improve perceptions ... that means to me we could have volatility through the end of the quarter.
The CBOE Volatility Index, the market's fear gauge, was down 9.7 percent, but remained above the key 30 level.
In other deal news, world No. 1 oil drilling contractor Transocean is paying double the market price for Aker Drilling to refresh its aging fleet of Norwegian drilling rigs and boost flagging orders. Transocean shares were up 2.8 percent at $57.14 in New York.
(Reporting by Caroline Valetkevitch; Additional reporting by Ashley Lau; Editing by Kenneth Barry)