By Alexander Osipovich and Joe Wallace
A rebound in technology shares lifted U.S. stocks Monday, helping major indexes recover following last week's pullback.
The tech-heavy Nasdaq Composite jumped 2% after last week suffering its biggest one-week decline since the March market crisis. The Dow Jones Industrial Average climbed 406 points, or about 1.5% and the S&P 500 advanced 1.6%.
Oracle was among the strongest performers in the S&P 500, with shares climbing 4.8% after the tech company won the bidding for the U.S. operations of video-sharing app TikTok, according to people with knowledge of the matter. Chip-maker Nvidia rallied 6% after it agreed to buy British chip-designer Arm Holdings for more than $40 billion from SoftBank Group Corp.
Monday's advance extends a spell of outsize moves in both directions for U.S. stock indexes, much of it driven by shares of large technology companies that have powered the market's recovery since the spring.
Stocks like Apple and Microsoft had soared in recent months, with investors betting tech companies were better positioned to handle the Covid-19 pandemic than more traditional industries. Rock-bottom interest rates also pushed investors into riskier assets. But the tech rally abruptly lost steam this month. Even with Monday's gains, the Nasdaq remains about 8% below the record highs it reached in early September.
Mike Dowdall, a portfolio manager at BMO Global Asset Management, said he was being cautious on tech stocks because of their lofty valuations. "Even though the economic story is really strong, it's hard to step into that trade at the moment," he said.
Stocks have been also buffeted this month by uncertainty about the U.S. presidential election and worries that the economic recovery, which appeared vigorous earlier this summer, could be slowing.
"We're shifting into an environment of lower returns and higher volatility and this is not inconsistent with that," said James McCormick, global head of desk strategy at NatWest Markets.
"This isn't a message that we're going back to February, March markets," Mr. McCormick added, referring to the historic declines that took place when countries locked down to control Covid-19. "But I think the upside is going be a bit capped here until we get through some of these events and risks."
Investor sentiment was boosted by the resumption of clinical trials of AstraZeneca's experimental coronavirus vaccine in the U.K. Studies were put on pause globally after a person who received the vaccine had an unexplained illness. Trials in other countries, including the U.S., remain on hold.
"There's a bit more positivity as regards vaccines," said Robert Carnell, head of research for Asia-Pacific at ING Groep. "The resumption of AstraZeneca trials will be seen in that light."
Gains were broad Monday, with all 11 of the S&P 500 advancing. The tech sector was among the biggest gainers with a 2% climb.
In corporate news, investors welcomed news that ViacomCBS is close to selling CNET Media Group to Red Ventures, pushing Class B shares in the entertainment giant up 3%.
Gilead Sciences was up 3.4% in choppy trading after the pharmaceutical company said it would pay $21 billion to buy biotech Immunomedics and its prized breast-cancer drug.
In government bonds, the yield on 10-year Treasury notes traded at a recent 0.664%, according to Tradweb, from 0.668% on Friday. Traders are awaiting the conclusion of the Federal Reserve's two-day monetary-policy meeting Wednesday, when the central bank is expected to hold interest rates steady.
The WSJ Dollar Index, which tracks the U.S. currency against a basket of others, fell 0.3%.
U.S. crude-oil futures fell 0.3% to $37.23 a barrel. In a monthly report, the Organization of the Petroleum Exporting Countries said the pandemic would reduce global oil demand by around 9.5% this year, more than the cartel previously forecast.
International stock markets were broadly higher. The Stoxx Europe 600 rose 0.1%. In Asia, China's Shanghai Composite Index gained 0.6% and Japan's Nikkei 225 advanced 0.7%.
Write to Joe Wallace at Joe.Wallace@wsj.com