Stocks climbed Monday as a fresh batch of merger news offset persistent worries about the health of the U.S. economy and the upcoming "confession season." It was the market's best day in nearly two weeks.

The blue-chip Dow Jones industrial average gained 85.25 points to end the session at 9,896.40 while the technology-packed Nasdaq Composite Index climbed 34.32 points at 1,987.49. The broader Standard & Poor's 500 Index added 11.21 points at 1,134.43.

A number of deals, including Vivendi Universal's bid for USA Networks, captured Wall Street's attention.

"Historically, the December/January period is a strong one," said Erik Gustafson, portfolio manager at Stein, Roe & Farnham. "While the last couple of years have not seen that, some investors are expecting to see a more positive tone to the December/January timeframe."

But traders were on edge with the fourth-quarter corporate confession season — when companies often unleash any bad news about their earnings — set to heat up in the latter part of December.

Investors scooped up shares of USA Networks after Vivendi Universal secured a much-needed U.S. distribution outlet for its vast film and TV catalogue with a deal worth at least $10.3 billion to buy the entertainment arm of Barry Diller's USA Networks. USA shares rose $1.20, or 5 percent, to $25.02.

Another deal involved Amgen Inc.the world's largest biotechnology company, which said it was buying smaller rival and leading arthritis drug maker Immunex for $16 billion in cash and stock. Amgen shares rose $3.46, or 6.2 percent, to $59.49, and Immunex rallied $3.44, or 13.4 percent, to $29.06.

More merger news came from the world's biggest cruise operator, Carnival Corp. , which announced it would turn hostile with its rejected $4.6 billion bid for P&O Princess to derail P&O's merger with rival Royal Caribbean. Carnival shares slipped 47 cents, or 1.7 percent, to $26.83, and Royal Caribbean tumbled $1.91, or 11.7 percent, to $14.42.

Help for the chip sector came from South Korea's Samsung Electronics Co. Ltd. , the world's top memory chipmaker, and third-ranked Hynix Semiconductor Inc. , which raised contract chip prices by up to 20 percent for the second time in December.

The most actively traded shares on the New York Stock Exchange belonged to General Electric , which rose 65 cents to $38.30. GE Capital, a unit of General Electric Co., said on Friday it had entered into an agreement to acquire real estate operating firm Security Capital Group Inc. Security Capital's stock rallied $4.59 to $25.29.

Upbeat comments came from microchip maker Conexant Systems Inc. , which expects its revenues to grow 10 percent, due to the stronger communications division. Conexant jumped 71 cents to $16.57.

Alpha Industries Inc. spiked $5.15 to $26.35 on news it and Conexant would combine their wireless businesses, creating a new $3 billion wireless semiconductor company.

Still, nagging worries about the health of the economy and corporate profits have kept a cap on Wall Street's enthusiasm.

"Some people think that we have reached the bottom in the economy, others don't think so, and I really think that's the cross-current," said James Volk, co-director of institutional trading at D.A. Davidson & Co.

Major stock indexes stumbled lower last week, but investors were comforted that the market held up as well as it did considering the barrage of bad news, including warnings from drug giants Merck & Co. Inc. and Bristol-Myers Squibb Co. , analysts said.

"The optimism comes from the fact that this market didn't correct very significantly in the face of all of the warnings," said Ned Riley, chief investment strategist at State Street Global Advisors.

Advancing stocks led decliners slightly more than 8 to 7 on the New York Stock Exchange. Volume totaled 1.23 billion shares, the same number that were traded Friday. 

The Russell 2000 index, the barometer of small company stocks, rose 8.65, or 1.8 percent, to 479.94. 

Overseas, Japan's Nikkei stock average lost 1.8 percent. European stocks fared better. Germany's DAX index rose 3.2 percent, Britain's FT-SE 100 advanced 1.5 percent, and France's CAC-40 climbed 3.3 percent.

Reuters and the Associated Press contributed to this report.