Stocks rebounded sharply, led by financial and telecommunications issues, as investors bet that the Federal Reserve will leave interest rates alone on Tuesday. Prices also got a boost from the latest corporate merger announcements.

The Dow Jones industrial average rose 128.23, to 10,401.23, after posting losses in three of the past four sessions.

Broader indicators also closed higher. The Standard & Poor's 500-stock index was up 21.79 at 1304.60, and the Nasdaq composite index rose 59.12, to 2795.97.

Analysts said the market has come to believe that the Federal Reserve will leave interest rates unchanged when its policy-writing Open Market Committee meets Tuesday. While widespread worries about higher rates sent stock prices plunging in recent weeks, most economists say there actually are few signs that the economy is growing too fast.

Gold rose more than 4 percent, to a two-year high, extending last week's rally as buying by speculators who were caught off guard by the price surge further tightened available supplies. On the New York Mercantile Exchange's Commodity Exchange, gold for current delivery rose to $316.40, from $303.70 on Friday. It was the ninth gain in the last 10 trading sessions.

In the stock market, meanwhile, a spate of merger announcements also helped to lift investors' spirits.

Telecommunications issues rose after BellSouth joined a bidding war with MCI WorldCom for Sprint, the No. 3 U.S. long-distance carrier. Sprint rose 3 7/8, to 60 7/8, and MCI rose 1 1/8, to 71 5/8, while BellSouth slid 2-11/16, to 42-11/16.

Radio stocks rose after Clear Channel Communications said it is buying AMFM Inc. for $16.7 billion in stock, creating a company that will dominate the airwaves with 830 radio stations across the nation. AMFM's stock rose 1-5/16, to 65-3/16, and Clear Channel fell 3 7/8, to 76 1/2.

Gemstar International Group Ltd. said it will buy TV Guide for about $9.2 billion in stock and debt, to improve its electronic program guides. Gemstar fell 7-7/16, to 76-3/16, while TV Guide rose 4-13/32, to 45-15/16.

Meanwhile, Dow component AT&T, the No. 1 long-distance company, rose 2, to 43 3/4, as news spread that it may create separate "tracking" stocks to reflect the value of different businesses such as the company's cable and wireless operations.

American Express led the Dow, rising 6-3/16, to 137-9/16, on optimism that interest rates will remain stable. Higher rates could hurt borrowing, which would hurt the giant credit-card company's earnings.