While the March manufacturing report only narrowly beat expectations, investors were energized because the report showed U.S. prices rising less than expected, signaling that inflation may not be a near-term concern.
The Dow Jones industrial average (INDU) added 52 points, or 0.4%. The S&P 500 (SPX) rose 10 points, or 0.7%. The Nasdaq (COMP) gained 28 points, or 0.9%.
Still, market participants said trading was light Monday, and they expect the markets to stay mostly quiet this week ahead of Easter.
Heading into the trading day, investors digested manufacturing data from Europe and China that illustrated weaknesses in their respective economies.
"When you take a step back and look at the U.S. economy, we're muddling through but not knocking the ball out of the park," said Joe Tanious, global market strategist at J.P. Morgan Asset Management. "In Europe, the economies are slowing, and that reminds us that the sovereign debt issues in Europe are far from over."
Despite recent weak reports on housing and durable goods, stocks have largely been on a tear, with the Dow and S&P 500 ending their best first quarter in over a decade last week. The Nasdaq had its best first quarter since 1991.
The gains have been driven by generally improving economic data in the United States and easing concerns about the debt crisis in Europe. Stocks have also been supported by expectations that the Federal Reserve will continue to support the economy.
The dollar fell slightly against the British pound and the Japanese yen but gained slightly against the euro.
Oil for May delivery rose $2.21 to $105.23 a barrel.
Gold futures for April delivery gained $8.20 to $1,677.50 an ounce.
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