Overall action remained fairly quiet and trading volumes were low with many participants still away after the three-day Memorial Day weekend.
The Dow Jones Industrial Average gained 3 points to 13,510, as 16 of its 30 components advanced, led by IBM , Microsoft Corp. , Verizon Communications .
Also among blue chips, shares of Alcoa Inc. dropped 0.8%. Last week, Alcan Inc. turned down Alcoa's $28.5 billion hostile bid.
On Tuesday, Alcan gained 2%, after reports that Norsk Hydro and Rio Tinto are now considering making bids for the Montreal-based aluminum producer.
General Motors Corp. slumped 1.2% amid reports that BMW is interested in buying Ford Motor Co's Volvo unit.
The S&P 500 rose 0.1 points to 1,515, while the Nasdaq Composite gained 10 points to 2,567.
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.
Trading volumes showed 639 million shares exchanging hands on the New York Stock Exchange and 762 million on the Nasdaq stock market. Advancing issues outpaced gainers by 2 to 1 on the NYSE and by 17 to 11 on the Nasdaq.
By sector, multimedia networking , telecoms , and airlines led the gains, while oil and pharmaceuticals dropped.
Stocks briefly jumped higher after news that consumer confidence bounced back in May. The Conference Board's consumer confidence index rose to 108.0 in May from 106.3 in April. Economists expected the index to rise to 105.8.
But it was merger news that again 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.
Crude futures were falling sharply, with the front-month contract down $1.57 at $63.63 a barrel. Nigerian oil workers have called off a strike and several refineries, including three in the Gulf Coast, are coming back on line.
Treasury prices were slightly lower, sending yields a bit higher, after the consumer confidence data. The benchmark 10-year Treasury note last was down 5/32 at 97 1/32 with a yield of 4.884%.
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.
Gold also rose amid dollar weakness signs of investment demand for the precious metal. Gold futures were up $2.40 at $657.70 an ounce.
Archstone-Smith is close to a $20 billion deal under which it would be acquired by Tishman Speyer and Lehman Brothers .
Bradley Pharmaceuticals jumped over 20% after its chief executive bid to take the company private for $21.50 a share, a 17% premium over its Friday closing price.
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.
By Nick Godt