Updated 4:34 p.m. ET
U.S. stocks rallied on Monday as investors focused on an improving geopolitical outlook. Corporate deal news gave the US stock market a lift as a bidding battle erupted for a discount retailer. Dollar General jumped after it made a bid for a rival discount retailer Family Dollar. Airlines were among the big gainers as the price of oil slumped.
The stock market also climbed as worries about an escalating conflict in Ukraine eased amid reports of diplomatic efforts to broker a cease-fire.
The Nasdaq composite gained 43 points to close at 4,508, a 14-year high.The Standard & Poor's 500 index rose 17 points to 1972. The Dow Jones industrial average gained 176 points, or 1 percent, to 16,839.
Dollar General rose 12 percent, to $64.14 after the company made a bid to buy Family Dollar for $9.7 billion. The bid is higher than the $8.5 billion bid that Dollar Tree, another discount retailer, made for Family Dollar last month.
Sterne Agee recommended buying Dollar General's stock following the announcement, saying that the company could benefit from significantly higher earnings following the acquisition. Family Dollar also jumped on the news while Dollar Tree fell.
Despite various geopolitical tensions in Ukraine, Iraq and elsewhere, stocks are still an attractive investment, said Dan Curtin, a global investment specialist for JPMorgan Private Bank.
Inflation remains and low and corporate earnings remain strong. Earnings growth in the second quarter was about 10 percent for companies in the S&P 500, compared to 4.9 percent in the same period a year ago and 3.4 percent in the first quarter, according to data from S&P Capital IQ.
"There are a lot of distractions out there, but the fundamental focus on equities is positive," Curtin said.
Airline stocks rose as the price of oil fell. United Continental and American Airlines rose. Fuel is a big component of airlines' costs, and the price of oil fell again Monday after dropping eight of the last nine weeks.
Monster Beverage slipped after analysts at Jefferies cut their rating on the stock from "buy" to "hold." Monster surged Friday after Coca-Cola said it was buying a 16.7 percent stake in the company. The analysts at Jefferies say that Monster's stock may now be fully valued after the gain.
European markets tumbled Friday on reports Ukraine destroyed a Russian military convoy that had crossed its eastern border. That incident, which was denied by Moscow, did not result in a military escalation by Russia, a prospect that worried investors. Meanwhile, Ukrainian army troops penetrated deep inside a city controlled by pro-Russian rebels in eastern Ukraine in what could prove a breakthrough development in the four-month-long conflict, the Ukrainian government said Sunday.
Central bankers, policy experts and academics from around the world meet at Jackson Hole, Wyoming, for an annual conference later this week. Federal Reserve Chair Janet Yellen is expected to reaffirm her position in a speech Friday that substantial slack remains in the economy and that the Fed should keep monetary policy loose to address the problem, Mihuzo Bank analysts said in a commentary.
Oil is trading near its lowest price since April after fears of supply disruptions from Iraq faded, removing much of the risk premium that had built up in May and June.