Updated from 4:14 p.m. EDT

Stocks started the week with gains Monday as a deluge of corporate deal making ultimately proved powerful enough to distract the bulls from the looming Federal Reserve rate meeting.

The Dow Jones Industrial Average rose 56.19 points, or 0.51%, to 11,045.28. The S&P 500 was up 6.06 points, or 0.49%, at 1250.56, and the Nasdaq Composite was higher by 12.20 points, or 0.58%, to 2133.67. The 10-year Treasury bond was down 2/32 in price to yield 5.24%, while the dollar fell against the yen and euro.

The Dow's rise was aided by gains of 1.6% in General Motors ( GM), Walt Disney ( DIS) and Pfizer ( PFE).

Volume was meager to start the week. About 1.34 billion shares changed hands on the New York Stock Exchange, with advancers outpacing decliners by a 5-to-3 margin. Volume on the Nasdaq was about 1.41 billion shares, and advancers beat decliners 3 to 2.

"Despite the huge surge in M&A activity, the market is off to a lackluster start for the week," said Michael Sheldon, chief market strategist with Spencer Clarke LLC. "Many investors are likely to be on the sidelines ahead of the Fed meeting."

Monday's corporate headlines were dominated by merger news, including a $40 billion transaction in which Phelps Dodge ( PD) will merge with Canadian miners Inco ( N) and Falconbridge ( FAL). The agreement will create one of the world's largest producers of nickel and copper.

Phelps Dodge dropped $6.72, or 8.1%, to $76.23, but Inco surged $5.95, or 10.2%, to $64.21. Falconbridge was higher by $2.50, or 5.1%, to close at $51.80.

Elsewhere, Johnson & Johnson ( JNJ) confirmed an agreement to acquire the consumer healthcare operations of Pfizer for $16.6 billion, while Dutch steel giant Mittal ( MT) closed a deal to acquire Arcelor for about $34 billion.

J&J fell $1.11, or 1.8%, to $60.21, and Pfizer was higher by 37 cents, or 1.6%, to $23.01. Mittal Steel gave up 77 cents, or 2.4%, to finish at $31.40.

Peter Cardillo, chief market strategist with S.W. Bach & Co, said that M&A activity supported the market, but "the big story remains the Federal Reserve meeting later this week, so we should still see a range-bound market. There isn't too much exciting news out there as the quarter comes to an end this week."

To view Gregg Greenberg's video take on today's market, click here

Meanwhile, J&J rival Boston Scientific ( BSX) lost 6.6% after the company said it will recall some pacemakers and defibrillators. Shares were off $1.20 to close at $17.06.

Sirius Satellite Radio ( SIRI) Chief Executive Mel Karmazin caused a stir in the tech sector when he said rival XM Satellite Radio ( XMSR) is an attractive acquisition target, but the stock price and regulatory hurdles would be issues.

Sirius was higher by 23 cents, or 5.2%, to $4.70. XM Satellite climbed 91 cents, or 6.7%, to $14.37.

Commodity prices were mixed. Crude jumped 93 cents to close at $71.80 a barrel, and gold fell 30 cents to $587.30 an ounce. Silver slid 4 cents to $10.24 an ounce, and copper was up 8 cents at $3.23 a pound.

Robert Pavlik, chief investment officer with Oaktree Asset Management, said that although M&A activity did bring investors back, "lost in much of today's trading was a rise in crude oil prices as we quietly reapproach the $72 level."

On the economic front, the Commerce Department said new homes sold at an annualized rate of 1.23 million last month, up 4.6% from 1.20 million in April. Economists were expecting new home sales to fall to an annualized pace of 1.15 million units.

On Tuesday, existing home sales, as measured by the National Association of Realtors, are expected to fall to 6.62 million for May from 6.76 million in April.

Homebuilder Lennar ( LEN) said its second-quarter profit rose 39% to $325 million, or 2 cents a share, beating estimates. The company also cut its full-year forecast to $8 to $8.25 a share, from previous guidance of $9.25 a share, citing a slowdown in orders. Despite Lennar's lowered guidance, shares climbed $1.14, or 2.6%, to $45.68.

By sector, the Philadelphia Housing Sector index was higher by 1.8%. Elsewhere, the Philadelphia Oil Service Sector index tacked on 0.9%, and the Amex Gold Bugs index gained 1.2%. The Philadelphia Semiconductor Sector index added 0.7%, and the Philadelphia/KBW Bank Sector index closed up 0.9%.

Also in earnings, Walgreen ( WAG) reported a fiscal third-quarter profit of $469.2 million, or 46 cents a share, up 14.2% from a year ago. The Thomson First Call consensus was for EPS of 44 cents. Shares rose 49 cents, or 1.1%, to $44.10.

Among rating moves, Thomas Weisel upgraded Qualcomm ( QCOM) to outperform from peer perform. Meanwhile, AG Edwards slashed its rating on Kerr-McGee ( KMG), which was acquired by Anadarko Petroleum ( APC) on Friday, to sell from buy.

Qualcomm finished up 59 cents, or 1.5%, to $40.09, and Kerr-McGee was higher by 57 cents, or 0.8%, to close at $69.18.

Overseas markets were narrowly mixed, with London's FTSE 100 losing 0.2% to 5681 and Germany's Xetra DAX falling 0.3% to 5515. In Asia, Japan's Nikkei rose 0.2% overnight to 15,152, and Hong Kong's Hang Seng was little changed at 15,805.

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