The Dow Jones industrial average gained 104.83 points, or 0.89 percent, to close at 11,913.62. Caterpillar, the world's largest maker of construction and mining equipment, soared more than 5 percent to lead the Dow after the company surprised investors on Monday by reporting a 44-percent quarterly earnings increase and record revenue.

　　What's more, the company also raised its full-year profit and revenue forecasts, which greatly boosted sentiment as people always look the company as a key barometer to the global economic activity.

　　The Standard & Poor's 500 was up 15.94 points, or 1.29 percent, to 1,254.19, the highest close in about three months, with basic materials and financials among the best performers.

　　The Nasdaq Composite Index rose 61.98 points, or 2.35 percent, to 2,699.44, which was positive for the year thanks to the rally in chip stocks.

　　Among the winners, Advanced Micro Devices surged more than 6 percent while Texas Instruments was up nearly 4 percent and Nvidia Corp. jumped more than 3 percent.

　　Investors still focused on headlines coming out of Europe. The region's leaders held a summit on Sunday, talking about solutions to address the ongoing debt crisis. Although there were still differences between the two largest euro zone countries Germany and France, market was optimistic that a concrete deal would be reached by Wednesday.

　　Stocks got another lift after New York Federal Reserve President William Dudley said another round of quantitative easing was a possible option for the central bank as it tried to address the struggling U.S. economy.

　　Besides, investors were happy to see that Japan's export rose for the second month in September after declining five months on the heel of the devastating earthquake in March, indicating Japan' s economy was gaining momentum.

　　And adding to the gains, China's Manufacturing Purchasing Managers Index returned to expansion area, according to the HSBC.