The gains came a day ahead of the U.S. midterm elections, though the prospect of a power shift in Congress didn't seem to unnerve investors.
"I think what you're seeing on the tape is a reflection of the amount of money that has been raised in the private equity pools and that money is starting to go to work," said John O'Donoghue, co-head of equities at Cowen & Co.
He also said investors are growing more confident that the elections will bring gridlock in Washington, a prospect Wall Street finds pleasing because it is seen as reducing risks to business interests.
The Dow rose 119.51, or 1.00 percent, to 12,105.55. The Dow moved back above the benchmark 12,000 level after closing below that Friday, when the blue chip average ended the week down 104.22 points. The Dow hadn't closed below that level since first finishing above 12,000 on Oct. 19.
Broader stock indicators also advanced Monday. The Standard & Poor's 500 index was up 15.48, or 1.13 percent, at 1,379.78, and the Nasdaq composite index advanced 35.16, or 1.51 percent, to 2,365.95.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.70 percent from 4.71 percent late Friday. The dollar was mixed against other major currencies, while gold prices fell.
"I think it's a pretty broad-based rally," said Stephen Massocca, president of Pacific Growth Equities. "I think when you see things this strong it's a harbinger of things to come."
Investors shrugged off a moderate rise in crude prices. Last week, an increase in oil prompted by concern about attacks on facilities in Nigeria helped push stocks lower. While those fears receded after violence proved to be less widespread than expected, an OPEC official said Monday that further production could be needed this year. Light, sweet crude was up 88 cents at $60.02 a barrel on the New York Mercantile Exchange.
Stocks rose sharply in October as investors sensed that corporate profits would hold up as the economy cooled. That notion lost backers last week, however, as negative economic data stirred fears the economy was slowing too quickly. Prior to Monday's gain, when 28 of the 30 stocks that make up the Dow closed higher, the best-known market index closed lower for six straight sessions for the first time since June 2005.
Investors showed little reaction to comments from Chicago Federal Reserve President Michael H. Moskow about inflation, an often sensitive topic on Wall Street. Moskow was quoted in prepared remarks as saying that the risk of inflation remaining too high outweighs the risk that economic growth will slow too much.
O'Donoghue believes investors will be examining valuations of stocks to consider whether they are too low given that the latest buyout offers carry hefty premiums for some companies.
The slew of private equity deals announced Monday were worth about $20 billion. Interest in private equity has increased as costs public companies face for regulatory compliance has increased, in part due to legislation aimed at curbing high-profile scandals seen in recent years such as the one that eventually felled Enron Corp. In addition, many private equity firms see opportunity in taking a company private, making changes and reaping the windfall if a company again goes public.
Four Seasons jumped $18.63, or 29.2 percent, to $82.50 after the luxury hotel chain received an offer to be taken private for $3.7 billion from the controlling shareholder of Four Seasons and investors including Bill Gates' Cascade Investment LLC.
OSI Restaurant, owner of the Outback Steakhouse chain among others, rose $7.32, or 22.6 percent, to $39.75 after agreeing to be acquired by a private investor group for about $3 billion.
Swift Transportation Co. rose $5.79, or 24.1 percent, to $29.84 after the truckload carrier received a $29-per-share buyout offer from its largest shareholder.
Abbott Laboratories, in a bid to expand its cholesterol drug holdings, agreed to acquire the drugmaker Kos Pharmaceuticals Inc. for about $3.7 billion. Kos surged $26.97, or 53.8 percent, to $77.06, while Abbott was off 17 cents at $47.47.
XM Satellite Radio Holdings Inc., rose $1.78, or 15.6 percent, to $13.17 after the company posted a narrower-than-expected loss for the third quarter and forecast its subscriber base would end the year near the lower end of its prediction.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to 2.53 billion shares, compared with 2.44 billion traded Friday.
The Russell 2000 index of smaller companies was up 10.35, or 1.37 percent, at 763.08.
Overseas, Japan's Nikkei stock average rose 0.09 percent. Britain's FTSE 100 closed up 1.24 percent, Germany's DAX index was up 1.43 percent, and France's CAC-40 was up 1.24 percent.