Last updated 12:22 p.m. ET

Stocks surged Monday after a surprising manufacturing report showed that activity climbed in September. Monday's rally comes after a turbulent previous week that ended a positive quarter.

The Dow Jones Industrial Average ($INDU) was up 147 points at 13,584. The S&P 500 ($INX) was up 12 points at 1,452. The Nasdaq Composite ($COMPX) was up 9 points at 3,126.

U.S. Institute for Supply Management's September manufacturing index climbed from 49.6 in August to 51.5 in September, rising above 50 -- signalling expansion rather than contraction. Economists expected a reading of 49.7, according to Briefing.com. It's the first time since May that U.S. manufacturing expands.

Another manufacturing index, the final Markit U.S. Manufacturing Purchasing Managers Index, fell from 51.5 in August to 51.1 in September -- the lowest in three years -- as foreign demand for U.S. goods fell sharply. A level above 50 indicates expansion.

Construction spending in August fell 0.6% after falling 0.9% in July.

Much of the attention last week focused on Spain, as many observers expect the country to ask for international aid soon. The country last week detailed its 2013 budget plan and reported the results of its banks' stress test, both of which didn't cause markets too much alarm. Spain remains in focus after Moody's Investors Service said the upcoming recapitalization of Spanish banks is credit positive but ultimately may be "insufficient."

Greece's government, too, will unveil its budget later on Monday. It will likely contain tough austerity measures as the country is poised to enter its sixth year of recession.

Europe still struggling
In the eurozone, the number of jobless people climbed to a record high rate of 18.196 in August as the area's economy continued to struggle. The jobless rate in August remained unchanged at 11.4% of the workforce. With the economy struggling, the rate is likely to increase further.

Indeed, the final reading of the purchasing managers index, or PMI, for the eurozone manufacturing ticked higher from 45.1 to 46.1 but remained below 50 -- a level that's signalling contraction in activity -- for the 14th consecutive month.

Still, European stocks moved higher to rebound from last week's losses, which were driven mostly by Spain's woes, and despite weak data out of China.

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Chinese manufacturing activity also ticked higher to 49.8 in September from 49.2 in August but remained below 50 -- signalling contraction --  for a second straight month. Japan's Tankan index of large manufacturers' confidence declined to minus 3 for the past quarter. Japana's Nikkei ended lower, but several other markets were closed for a holiday.

Labor market in focus
While focus last week was on Spain, and Monday investors are paying attention to factory data, it's the labor markets that all eyes will turn to this week. Figures from ADP about private-sector jobs and weekly initial jobless claims will set the stage for Friday's monthly nonfarm payroll report from the Labor Department.

Stocks to watch
3M Co. (MMM) has agreed to acquire Ceradyne (CRDN) for $35 a share, which is a 43% premium over the its Friday close. The transaction has an aggregate value of about $860 million, or $670 million net of cash, cash equivalents, short-term investments and debt acquired, 3M said. Excluding one-time costs, the transaction will add about a penny a share to 3M's earnings in the first 12 months after the deal closes, the company said.

Nokia (NOK) and Oracle (ORCL) are expected to announce a deal that will give Oracle's customers access to Nokia's mapping service.

Apple (AAPL) shares advanced, shaking some of last week's losses on the heels of initial iPhone 5 sales that disappointed some analysts. On Friday, CEO Tim Cook apologized for the flawed mapping software.

The U.S. Defense Department on Friday awarded United Launch Alliance, which is a 50-50 joint venture of Lockheed Martin (LMT) and Boeing (BA), a $1.17 billion contract to provide satellite launches using its Delta IV and Atlas V rockets.

Monster Worldwide (MWW) advanced after DealReporter said the company may receive a takeover bid.

Airline stocks such as United Continental (UAL), Delta (DAL) and US Airways (LCC)  may be active, as European airlines gained after the International Air Transport Association increased its 2012 profit forecast for the industry.

Honeywell International (HON) said Monday it'll pay $525 million in cash to buy a 70% stake in Thomas Russell Co., a privately held maker of technology and equipment for natural gas processing and treating.