The Dow Jones industrial average rose 109.47 points to 9,976.46, and the Nasdaq composite index gained 35.84 points to 1,934.42.
"It seems as though we've got bin Laden within grasp and that is combined with the idea that earnings and the economy will get better in the second quarter of next year," said Jim Herrick, head of equity trading for Robert W. Baird & Co. "The trend is higher and money is coming into the market."
After the Sept. 11 terrorist attacks, the market hit a low on Sept. 21 but has been rebounding since, with the war and the economy progressing better than expected.
There was more new home construction than economists anticipated, according to a new report from the Commerce Department. Housing starts hit a seasonally adjusted annual rate of 1.552 million units, better than the 1.513 million projected by economists surveyed by Reuters. But starts were down 1.3 percent from the rate of 1.572 million recorded in September.
Although the gloomy economy has not yet begun to trip up new construction, which many have regarded as a hopeful sign, there are indications the market could finally be reacting to layoffs and consumer uncertainty. Housing permits fell 3.6 percent to an annual rate of 1.473 million in October, the weakest pace since December 1997.
Handheld device makers Palm and Handspring rose Monday, with Palm up 44 cents at $3.87 and Handspring up $1.41 at $5.41. Industry analysts are hoping that the recent departure of Palm's CEO could pave the way for a merger between the two.
Handspring on Friday filed a shelf registration with the Securities and Exchange Commission that would allow it to issue up to $60 million in various types of securities, including secured or unsecured debt securities, preferred stock, common stock and warrants.
Business software maker PeopleSoft said that despite the economic slowdown, it is on target to meet earnings expectations, citing strong orders. The stock gained $3.69 at $36.05.
Lucent Technologies completed the sale of its Optical Fiber Solutions business to Japan's Furukawa Electric Friday. The deal was valued at $2.3 billion, about $225 million less than originally agreed. Lucent was up 38 cents to $8.59.
StarMedia, an Internet media company targeting Spanish- and Portuguese-language users, said it would restate its financial results for 2000 and the first half of 2001 because it appears two Mexican units improperly recognized some revenues in those years. Trading on the stock was halted.
Among other heavily traded tech issues, JDS Uniphase was up 66 cents to $12.26, XO Communications rose 22 cents to $1.36, Cisco Systems was up 69 cents to $20.71, and Sun Microsystems gained 27 cents to $13.66.
Amazon.com was up 24 cents at $9.19, and AOL Time Warner rose 85 cents at $37.75.
Staff and Reuters contributed to this report.