The Dow Jones Industrial Average gained 33 points to 13,541, as 23 of its 30 components advanced, led by Boeing Co. , IBM and Verizon Communications .
The S&P 500 rose 3.3 points to 1,519, while the Nasdaq Composite gained 9 points to 2,566.
Among tech shares, Google Inc. gained 1%, even after news that the Federal Trade Commission has begun a preliminary antitrust probe into its planned $3 billion deal to buy online advertiser DoubleClick.
Early trading action was fairly quiet with many participants still away after the three-day Memorial Day weekend.
Trading volumes showed 88 million shares exchanging hands on the New York Stock Exchange and 109 million on the Nasdaq stock market. Advancing issues outpaced gainers by 20 to 7 on the NYSE and by 2 to 1 on the Nasdaq.
Merger news, however, set the stage for the market rally to continue.
"We're mostly focusing on the many deals that have been announced," said Art Hogan, chief market strategist at Jefferies & Co. "The world is awash with liquidity and that is what is driving us."
Leading the flow of deal news, the Royal Bank of Scotland-led group officially launched an offer for ABN Amro in a deal valued at $95.5 billion. That offer is higher than a rival all-stock offer from Barclays . RBS said it had "amicable" talks with Bank of America about a settlement over its disputed purchase of LaSalle from ABN Amro.
The main data event of the day will be the May consumer confidence report, which is due at 10 a.m. The MarketWatch forecast, based on a poll of economists is for a reading of 105.8, which would be an improvement over 104.0 in April
Treasury prices were slightly lower, sending yields a bit higher, as the post-holiday trading session got off to a slow start. The benchmark 10-year Treasury note last was down 2/32 at 97-4/32 with a yield of 4.864%.
The dollar was under pressure against its major rivals in early trade. It last traded down 0.08% at 121.52 yen as the euro rose 0.4% to $1.3510.
Crude futures were trending lower, with the front-month contract down $1.30 at $64.97 a barrel, as the gold futures traded higher, rising $2.90 to $658.20. an ounce.
Archstone-Smith is close to a $20 billion deal under which it would be acquired by Tishman Speyer and Lehman Brothers .
There also are reports that BMW is interested in buying Ford Motor Co's Volvo unit.
Avaya gained 14% following news reports that some private equity firms would like to buy it.
In completed deals, URS Corp. agreed to buy engineering and design company Washington Group in a stock-and-cash deal worth $2.6 billion.
Norsk Hydro and Rio Tinto are considering making bids for Alcan Inc., according to reports. Alcan has turned down a hostile bid from fellow aluminum producer Alcoa .
By Nick Godt