With Citigroup Inc. freed to pursue expansion by federal regulators and Computer Sciences Corp. putting itself up for sale, investors were cheered by the potential for M&A activity to remain strong through the rest of the year.

However, there were no new economic reports or major corporate earnings and some investors held off from making big bets ahead of Friday's Labor Department report on job creation, a key barometer of economic health.

"There's fairly widespread anticipation that the economic numbers this week will be solid, though not great, and I think the market is reflecting that," said Hugh Johnson, chief investment officer at Johnson Illington Advisors.

The Nasdaq composite index gained 8.62, or 0.37 percent, to 2,345.36. It was the index's best showing since Feb. 16, 2001, when it closed at 2,425.38.

Other stock indicators also moved higher. The Dow Jones industrial average rose 58.91, or 0.53 percent, to 11,203.85, and the Standard & Poor's 500 index added 8.12, or 0.63 percent, to 1,305.93.

Bonds were little changed, with the yield on the 10-year Treasury note steady at 4.87 percent from late yesterday. The dollar fell against most major currencies after a news report predicted the European Central Bank would raise its interest rates, while gold prices were higher.

Oil prices fell as traders took profits from the recent rally, though concerns about the political situations in Iran and Nigeria continued to pressure the market. A barrel of light crude settled at $66.23, down 51 cents on the New York Mercantile Exchange.

In corporate news, Dow industrial Citigroup gained 80 cents to $48.21 after the Federal Reserve Bank of New York lifted a year-long ban on new acquisitions as the financial conglomerate worked to improve its internal compliance programs.

Computer Sciences announced its intention to examine "strategic alternatives" — including a sale of the company — while also cutting 5,000 jobs, or 6 percent of its workforce, over the next two years. Computer Sciences jumped $2.51 to $59.80.

The potential for increased M&A deals comes as the Federal Reserve is expected to wind down its current program of interest rate hikes. While another increase is expected in May, bringing the nation's benchmark rate to 5 percent, halting rate hikes soon after could prompt companies to renew their acquisition efforts, knowing that rates for borrowing would be stable.

"The next phase of the market is in M&A activity, and the Fed moving to the sidelines will help with that," said Joe Keating, chief investment officer at First American Asset Management. "So I think investors can still stay in the market and put their money to work."

3M Co. climbed $1.16 to $77 as the Dow component said it would consider selling its branded pharmaceutical business. The unit, which makes products relating to dermatology, women's health and cardiology, employs 1,500 people worldwide.

Electronics retailer Best Buy Co. Inc. said it laid off 300 workers at its corporate headquarters, though it still plans to add jobs at its stores. Best Buy added $1.56 to $57.

International Paper Co. rose 18 cents to $34.90 as the world's largest forest products company announced the sale of 5.1 million acres of forest land to two investor groups for approximately $6.1 billion.

Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where preliminary consolidated volume came to 2.2 billion shares, compared with 2.55 billion traded yesterday.

The Russell 2000 index of smaller companies rose 3.10, or 0.41 percent, to 762.32.

Overseas, Japan's Nikkei stock average fell 0.23 percent. In Europe, Britain's FTSE 100 was down 0.33 percent, France's CAC-40 dropped 0.94 percent for the session, and Germany's DAX index lost 0.17 percent in late trading.