Wall Street rallied Monday on stronger manufacturing activity and buyout news with the Dow Jones average rose more than 120 points.

The U.S. manufacturing sector expanded in June at its fastest pace since April 2006, the Institute for Supply Management said Monday in its latest report on business.

The manufacturing index registered 56.0 in June, the fifth consecutive month of growth, up from the May reading of 55 and higher than the market expectation of 55.4.

Investors were also encouraged by takeover news as BCE Inc., a Canadian telecommunications company, received a multibillion-dollar buyout offer.

Meanwhile, Carlyle Group, one of the biggest U.S. private equity firm, offered 11.1 billion dollars to buy New York-based telecommunications company Virgin Media Inc.

As inflation concerns reduced, the 10-year Treasury note's yield fell to 5.01 percent from 5.03 percent.

The Dow Jones industrial average rose 128.85, or 0.96 percent to 13,537.47. The Standard & Poor's 500 index was up 16.09, or 1.07 percent, to 1,519.44, and the Nasdaq composite index was up 29.07, or 1.12 percent, at 2,632.30.