Boeing Co helped push the Dow and Standard & Poor's 500 indexes higher after Singapore Airlines Ltd said it plans to buy up to 31 Boeing long-range 777-300ER planes worth about $7.35 billion.
But oil continued to be the focus and fuelled market strength as NYMEX October crude futures tumbled nearly $2 to end below $44 a barrel amid a fall in the price of gasoline.
High oil prices concern investors because of the impact increased costs have on corporate profit margins and consumer spending. A drop in the crude price generally boosts stocks.
"Oil is significantly off its recent highs, so that will lessen people's anxieties about oil and its effect on the economy," said Tom Schrader, managing director, US equity trading at Legg Mason Wood Walker in Baltimore.
The sell-off in oil helped push the blue chip Dow to its highest close in more than a month, while the S&P and Nasdaq were back to levels seen at the beginning of August.
The Dow Jones industrial average was up 83.11 points, or 0.82 percent, at 10,181.74. The Standard & Poor's 500 Index was up 8.77 points, or 0.80 percent, at 1,104.96. The technology-laced Nasdaq Composite Index rose 23.83 points, or 1.30 percent, at 1,860.72.
Trading was light, with 1.19 billion shares changing hands on the New York Stock Exchange, below the 1.4 billion daily average for last year. About 1.3 billion shares were traded on Nasdaq, below the 1.69 billion daily average last year.
Advancers outnumbered decliners on the NYSE and Nasdaq by about 2-to-1.
That weighed on homebuilders. Shares of K.B. Home fell 56 cents to $68.24, while shares of Pulte Homes Inc fell 56 cents to $59.19. Centex Corp was down 19 cents at $46.31.
Among shares boosting the market was Boeing, up $1.59, or 3.12 percent, to $52.50.
Williams-Sonoma Inc rose $3.14, or 9.97 percent, to $34.64, after it posted a better-than-expected 55 percent increase in quarterly profit as sales jumped at its Pottery Barn chain. The housewares retailer maintained its earnings forecasts for the rest of the year despite the strong quarterly performance, citing economic and "geopolitical" uncertainty. Chipmaker Intel Corp rose 28 cents to $21.95, a 1.29 percent rise, Advanced Micro Devices Inc rose cents to $12.20, a 2.09 percent increase, while Applied Materials Inc, the world's largest maker of chip-making gear, gained 33 cents to $16.26.
But apparel retailer Gap Inc weighed on the S&P 500 index after Merrill Lynch downgraded the retailer to "neutral" from "buy." Its shares fell 40 cents, or 2.01 percent, to $19.52.