Updated from 4:01 p.m. EDT

Stocks rebounded from two straight down days with a big rally Monday, as buyers came back following a major acquisition in the retail sector and an employment survey showing progress in the job market.

The

Dow Jones Industrial Average closed with a gain of 169.74 points, or 1.7%, to 10109.66. The

Nasdaq jumped 51.69 points, or 3.2%, to 1652.54, and the

S&P 500 added 19.57 points, or 1.9%, to 1074.56.

One of the biggest corporate stories involved

Sears

(S) - Get Report

, which announced plans to acquire catalog and Internet retailer

Lands' End

(LE) - Get Report

for $1.9 billion, or $62 a share, in cash. Sears doesn't expect to incur a special charge on the deal. Sears also said it expects to post a profit of $4.22 a share in 2002, including Lands' End. Shares of Lands' End soared 21% to $61.73 on the news, while Sears ended down 0.4% to $52.

Elsewhere in the retail sector,

May Department Stores

( MAY), which operates the Lord & Taylor and Filene's chains, said first-quarter earnings dropped 36% as the company took charges to consolidate its operations. The company posted earnings, excluding charges, of $95 million, or 31 cents a share, matching analysts' expectations. The stock fell 0.9% to $34.72.

Separately,

Toys R Us

( TOY) projected a narrower first-quarter loss than analysts are expecting, but the company's shares slipped 0.6% to $17.09. The Dow Jones U.S. Retail Index was up 0.8%.

Employment conditions may be improving, with more U.S. companies expected to add new jobs in the third quarter, according to

Manpower's

(MAN) - Get Report

latest employment outlook survey. The survey, which polled nearly 16,000 public and private firms in 477 U.S. markets, revealed that 27% of respondents plan to add new employees in the third quarter, compared with only 21% in the previous quarter.

The survey also showed that 59% of the companies expect to maintain their current staffing levels in the third quarter. The data mark the most optimistic survey results in over a year, and are consistent with past recovery trends.

Telecom shares were making strides with

Qualcomm

(QCOM) - Get Report

,

Broadcom

(BRCM)

and

Ericsson

( ERICY) all gaining ground. The Nasdaq Telecommunications Index climbed 2.9%.

Biotech stocks were having a good day, as the American Stock Exchange Biotechnology Index gained 3.3%.

In the chip sector,

Applied Materials

(AMAT) - Get Report

rose 8% to $25.58 a day before the semiconductor equipment maker reports its quarterly results.

Analysts were coming out with positive comments on the group Monday, with Goldman Sachs raising its 2002 and 2003 estimates on Applied, and Thomas Weisel saying investors should consider buying certain names in the sector, including

KLA-Tencor

(KLAC) - Get Report

. The Philadelphia Stock Exchange Semiconductor Index added 5.9%.

Airlines were mostly higher, but

US Airways

( U) was a notable exception. The carrier said in a regulatory filing that it might have to file for Chapter 11 bankruptcy protection unless it receives loan guarantees from the federal government. Shares of US Airways lost 17% to $2.98.

Meanwhile,

UAL

(UAL) - Get Report

, the parent company of United Airlines, was the big winner in the group after Goldman Sachs raised its rating on the stock to trading buy from market perform and set a price target of $20. UAL's shares were higher by 20% at $11.38.

Elsewhere,

CMS Energy

(CMS) - Get Report

said the

Securities and Exchange Commission

is investigating whether several of the company's electricity deals may have been executed to inflate trading volume. The company said it is cooperating fully with federal regulators. The energy traders have been in the spotlight recently because of a spate of inquiries into how the companies do business and book revenue. CMS was down 17% to $16.05.

Another energy swapper,

Reliant Resources

(RRI)

, fell 17% to $9.94 on word the company used trades that didn't generate profits or losses to boost revenue by 10% during the last three years. Reliant's parent company,

Reliant Energy

(REI) - Get Report

, was off 18% to $17.59.

U.S. Treasury issues were lower. The 10-year note was losing 26/32 at 97 11/32, yielding 5.22%. The long bond was the weakest issue, losing more than a point.

Overseas markets were mostly stronger. London's FTSE 100 added 0.7% to 5205, and Germany's Xetra DAX was higher by 2.1% to 4975. Japan's Nikkei 225 finished down 1.7% to 11,337, while Hong Kong's Hang Seng added 0.8% to 11,733.