Technology and media shares led the Nasdaq composite to its biggest point gain ever and the Dow Jones to a new closing high as investors celebrated the $166 billion (£126.98 billion) planned merger of America Online and Time Warner.

The Nasdaq composite index rose 167.04 to 4,049.66. The technology-dominated index has risen more than 300 points in the past two sessions, wiping out most of the three-day slump that knocked 400 points off it last week.

The Dow Jones rose 49.64 to 11,572.20, topping Friday's record close of 11,522.56.

Broader market indicators were also higher. According to preliminary calculations, the Standard and Poor's 500 rose 16.12 to 1,457.59. The Russell 2000 index of smaller companies rose 13.58 to 501.89.

Advancing issues outnumbered decliners by a four-to-three margin on the New York Stock Exchange, with 1,784 up, 1,356 down and 423 unchanged.