Gains in Microsoft shares, last up 4.1 per cent, bolstered momentum after reports that ValueAct Capital had taken a US$2 billion stake in the company.
Shares of Caterpillar also rose, last up 3.3 per cent. While the company reported earnings that fell short of expectations and downgraded its 2013 forecast, investors took heart from CEO Doug Oberhelman's comments that he was encouraged by "stability". The company also said it is reviving its share buyback program.
"This is the first year in three years where we've seen a relative degree of stability around the world," Oberhelman told CNBC. "I was just in Europe in the last two weeks at a huge construction show [and] the news wasn't doom and gloom."
He also expressed optimism about the outlook for China, even though the world's second-biggest economy last week slightly missed GDP forecasts.
In afternoon trading in New York, the Dow Jones Industrial Average rose 0.18 per cent, the Standard & Poor's 500 Index gained 0.53 per cent, while the Nasdaq Composite Index advanced 0.93 per cent.