Retail and transportation stocks rose as investors believed lower oil prices would help consumer spending. The drop in energy prices also massaged concerns that this week's data on consumer confidence, job growth, and manufacturing might show the economy is slowing faster than expected.

The market's advance came amid light summer volume, which is expected to remain thin until after Labor Day. Investors did get a handful of company announcements today, including Google Inc. and auction Web site eBay Inc. forming an advertising alliance.

Meanwhile, Kinder Morgan Inc.'s board agreed to take the natural-gas pipeline operator private, and Western Refining Inc. said it was acquiring Giant Industries Inc.

"The message of this week is 'if a tree falls in the forest, and there's nobody there, will it make noise?"' said Larry Peruzzi, a trader with Mellon Financial's The Boston Co. Asset management. "The market is just looking to head up, not get taken down, and sets up the table for September."

The Standard & Poor's 500 added 6.69, or 0.52 percent, to 1,301.78 — near a three-month high. Powering the index were components Altria Group Inc. and PepsiCo Inc., which touched on historic highs, and Coca-Cola Co. coming within pennies of a 52-week high.

Other major stock indicators also advanced. The Dow jumped 67.96, or 0.60 percent, to 11,352.01, recovering somewhat from last week's loss of 0.86 percent. The Nasdaq composite index, also near a three-month high, picked up 20.41, or 0.95 percent, to 2,160.70.

Bonds were mostly flat, with the yield on the benchmark 10-year Treasury note at 4.80 percent from Friday's five-month low of 4.79 percent. The dollar was mixed against other major currencies, while gold prices fell.

Energy prices retreated as it appeared Ernesto would likely swipe Florida instead of key oil and gas platforms in the Gulf of Mexico. A barrel of light, sweet crude tumbled $1.90 to $70.61 on the New York Mercantile Exchange. Meanwhile, gasoline futures fell by 11 cents to $1.78 a gallon and natural gas declined by 68 cents to $6.47 per 1,000 cubic feet.

The declines were welcomed by Wall Street after last week's economic data showed a sharp drop in new and existing home sales. The data prompted concerns about the economy, and threw into question the Federal Reserve's hope for a soft landing as a result of its string of 17 interest rate hikes.

Investors will be looking for clues as to the Fed's next move from this week's economic data, starting with the Conference Board's consumer confidence report tomorrow.

Consumer companies moved broadly higher, with Coca-Cola up 19 cents to $44.71, rival PepsiCo adding 82 cents to $65. Altria, which was higher throughout the day, gave up 5 cents to close at $84.05.

Retailers, which stand to benefit if consumers are spending less at the pumps, also rose. Wal-Mart Inc. led those gains after reporting over the weekend that August same-store sales rose 2.7 percent. The increase is in line with the retailer's forecast of same-store sales growth of 1 percent to 3 percent, sending shares higher by 55 cents to $44.43.

Buyers moved back into transport stocks, which had fallen for seven straight weeks. Continental Airlines Inc. rose $1, or 4.4 percent, to $23.96. FedEx Corp. shares picked up $1.75, or 1.8 percent, to $100.90.

Oil companies, which benefit from higher prices if crude supplies are disrupted by a hurricane, dipped as Ernesto was expect to veer away from the gulf. Exxon Mobil Corp., the world's largest oil company, dropped 33 cents to $70.10, while British Petroleum PLC shed a penny to $68.30. Royal Dutch Shell fell 7 cents to $73.12.

Kinder Morgan said a group led by its former founders will take the company private in a cash deal worth $15 billion, plus the assumption of $7 billion in debt. The stock rose $2.57, or 2.5 percent, to $104.27.

Also, Western Refining agreed to buy Giant Industries for $1.23 billion in cash, creating the fourth-largest publicly traded independent oil refiner in the United States. Western Refining dropped 85 cents, or 3.3 percent, to $25.14. Giant Industries surged $10.43, or 15 percent, to $82.22.

Tech stocks advanced after Google and eBay announced they would partner to help buyers quickly do business with online merchants. Ebay, one of the Nasdaq's most heavily traded stocks, gained 49 cents to $25.79. Google jumped $7.69, or 2.1 percent, to $380.95.

Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.85 billion, compared to 2.74 billion traded at the same point Friday.

The Russell 2000 index of smaller companies added 7.41, or 1.06 percent, to 706.65.

Overseas, Japan's Nikkei stock average lost 1.10 percent at the close. At the close, with London markets off for a holiday, Germany's DAX index added 0.75 percent and France's Cac-40 rose 0.73 percent.