All the 11 major S&P 500 sectors were up in early trading. The S&P 500 financials index jumped 2.6% and was on track for its best day in two and a half months.
Shares of technology-related stocks, which bore the brunt of a sell-off earlier this month, were higher, with Facebook Inc, Alphabet Inc , Amazon.com Inc, Apple Inc and Netflix Inc adding about 1% each.
John Traynor, chief investment officer at People's United Advisors, said the broad-based rally was a positive for risk sentiment as "what it tells you is that confidence is increasing that the economy is going to rebound."
Travel-related shares, including Delta Air Lines, United Airlines and American Airlines Group Inc , rose between 4.7% and 5.0%.
American Airlines Group Inc said on Friday it secured a $5.5 billion Treasury loan and could tap up to $2 billion more in October.
Worries over rising coronavirus cases and waning hopes of more fiscal stimulus have led to a spike in market volatility in the past few weeks, and analysts expect trading to remain choppy in the run-up to the Nov. 3 presidential election.
"We don't see this as the beginning of another big leg up. Between now and the election, you're going to see a lot of turmoil," Traynor said.
Optimism spilled over from Asian markets after data over the weekend showed profit at China's industrial firms rose for a fourth straight month in August.
"All of this data reminds investors that we're not headed for a new bear market or a new recession," said Sam Stovall, chief investment strategist at CFRA in New York.
At 11:32 a.m. ET, the Dow Jones Industrial Average was up 478.00 points, or 1.76%, at 27,651.96, the S&P 500 was up 51.13 points, or 1.55%, at 3,349.59. The Nasdaq Composite was up 151.24 points, or 1.39%, at 11,064.80.
Boeing shares rose 6.6% after Federal Aviation Administration Chief Steve Dickson said the agency was set to conduct a 737 MAX evaluation flight this week, a key milestone as the planemaker aims for approval to resume flight.
Devon Energy Corp jumped 10% after the oil and gas producer said it would buy peer WPX Energy Inc for $2.56 billion. WPX Energy shares surged 14%.
Uber Technologies Inc rose 4.9% after the ride-hailing firm won a legal bid to restore its London operating licence, which was taken away over safety concerns.
Advancing issues outnumbered decliners by a 6.55-to-1 ratio on the NYSE and by a 3.23-to-1 ratio on the Nasdaq.
The S&P index recorded five new 52-week highs and no new low, while the Nasdaq recorded 38 new highs and 13 new lows.
(Reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Anil D'Silva and Arun Koyyur)
By Devik Jain and Shreyashi Sanyal