Upbeat data, deals lift Wall Street

But traders await Fed decision later in the week

US stocks rose on Monday after closing Friday their worst week since August as upbeat economic data from the United States and Europe boosted optimism ahead of a key Federal Reserve decision later in the week.

Investors have been trying to gauge when the US central bank will start winding down its market-friendly $85 billion monthly bond purchases, with some expecting the Fed to announce a tapering in March.

Stronger economic data of late, including Monday's numbers showing US manufacturing output rose for a fourth straight month in November and last month's payroll report, led some to believe the tapering could come as soon as the Fed's meeting this week.

The Fed has said it will slow the program when certain economic indicators meet its growth targets.

Global manufacturing and business activity expanded in December, as euro zone businesses ended the year on a high thanks to a surge in new orders, though the rate of manufacturing growth slowed in China.

"There are signs of growth here in US is being emulated elsewhere, the recovery is in relatively good footing worldwide and the Fed's decision to eventually start to taper is positive in the long run," said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois.

"The market is waiting to see what the Fed is going to decide to do," he said. "Bottom line, the economy continues to show signs of strength and eventually the market will react positively to that."

The Dow Jones industrial average rose 129.21 points or 0.82%, to 15,884.57, the S&P 500 gained 11.22 points or 0.63%, to 1,786.54 and the Nasdaq Composite added 28.542 points or 0.71%, to 4,029.518.

LSI Corp was the best performer on the S&P 500 after Avago Technologies agreed to buy LSI for $6.6 billion. LSI shares jumped 38.6% to $10.96 and Avago added 9.7% to $50.10.

In other deal news, AIG Inc rose 1.1% to $50.28 after it said it would sell its aircraft-leasing business to AerCap Holdings NV in a deal valued at about $5.4 billion. AerCap surged 33.1% to $33.17.

Exxon Mobil led points gains on the S&P 500 after Goldman Sachs raised its rating on the stock to "buy" from "neutral," saying the company was nearing a turning point in terms of production growth and capital intensity. Shares added 2% to $97.22.

IBM's 2.9% gain to $177.85 made it the top%age and points gainer on the Dow industrials.

Shares of Herbalife Ltd jumped 9.4% to $74.83 after the company announced there were no material changes to its financial re-audit.

Boeing shares rose 1.7% in after-hours trading after it said it approved a $10 billion stock repurchase and raised its dividend 50% to 73 cents per share.

Advancers beat decliners on the NYSE by a ratio of 2 to 1. On the Nasdaq, about 15 issues rose for every seven that fell.

About 6 billion shares changed hands on US exchanges, slightly below the 6.1 billion average so far this month, according to data from BATS Global Markets.