U.S. stocks gained more than 1 percent on Monday, buoyed by the healthcare sector after a Senate bill advanced that had been stripped of provisions deemed detrimental to health insurers and other companies.

Stocks also got a lift from new merger and acquisition activity and brokerage upgrades of two Dow components.

Legislation to overhaul the U.S. healthcare system passed a crucial test early Monday as backers cleared a procedural hurdle to approving the bill, which is President Barack Obama's top legislative priority.

Following the vote, the Morgan Stanley Health Payor index <.HMO> climbed 2.5 percent while insurer Aetna Inc added 4.1 percent to $33.85.

The bill wasn't as meaty as it could have been, and it looks like what was finalized may not be as damaging to the sector as we had feared, said Alan Lancz, president of Alan B. Lancz & Associates Inc in Toledo, Ohio.

The fewer the restrictions imposed on insurers, the better the prospects will be for the sector and for the market, in Lancz's opinion.

The Dow Jones industrial average <.DJI> gained 116.92 points, or 1.13 percent, to 10,445.81. The Standard & Poor's 500 Index <.SPX> rose 13.65 points, or 1.24 percent, to 1,116.12. The Nasdaq Composite Index <.IXIC> jumped 25.47 points, or 1.15 percent, to 2,237.16.

Sentiment also brightened following news of several acquisition deals, including Sanofi-Aventis agreeing to buy consumer healthcare company Chattem Inc for about $1.9 billion, driving Chattem's stock up 32.8 percent to $92.93.

We haven't seen premiums of this magnitude since the crisis began, and the trend should continue, Lancz said. That could be a catalyst for 2010.

Among other deals on Monday, Bucyrus agreed to buy Terex's mining business for $1.3 billion in cash, while TreeHouse Foods said it would buy Sturm Foods from private equity firm HM Capital Partners for $660 million.

Bucyrus shares climbed 9.3 percent to $55.58 on Nasdaq, while Terex shares advanced 6 percent to $20.37 on the New York Stock Exchange.

The stock of TreeHouse surged 16.8 percent to $39.21.

Alcoa Inc gave the top boost to the Dow after Morgan Stanley raised its recommendation on the stock to buy, expecting the company to report increased profitability in its alumina and downstream divisions.

Alcoa's stock jumped 8.4 percent to $15.81 on the NYSE.[ID:nN21236781]

In deal news featuring Alcoa over the weekend, the blue-chip U.S. company made a joint announcement with state-run Saudi Arabian Mining Co, known as Maaden, that they have agreed to build a $10.8 billion aluminum complex.

Barclays upgraded Intel Corp to overweight, lifting the stock 3.1 percent to $20.23 on Nasdaq.

(Reporting by Ryan Vlastelica; Editing by Jan Paschal)

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