NEW YORK (AP) - Major stock indexes rose to their highest levels in more than a month yesterday after corporate buyouts raised hopes about the economy.

The Dow Jones industrial average rose 79 points. The Standard & Poor's 500 index, the basis of many mutual funds, erased its losses for the year. The Nasdaq composite index also turned positive for 2010 after a Japanese drugmaker said it was pursuing OSI Pharmaceuticals Inc. and SanDisk Corp. raised its revenue forecast.

The biggest boost for the market came from insurer American International Group Inc. (AIG), which agreed to sell its prized Asian life insurance business to Britain's Prudential plc. for $35.5 billion. It is seen as a sign of confidence in the economy when big businesses go ahead with takeovers.

AIG wants to sell the division, known as AIA Group, as part of its plan to streamline operations and repay the government. AIG had taken $129.3 billion in public assistance by the end of last year and is majority-owned by taxpayers.

Stocks also rose on hope that European nations will announce a bailout deal to help Greece with its mounting debt problems. Stocks around the world have been hurt in recent months because of concerns debt problems in Greece would spread to other countries and undermine Europe's shared currency, the euro.

European Union and Greek officials are meeting and media reports said a deal could be hammered out soon that would involve state-owned banks in Europe buying Greek government bonds.

The corporate takeovers and the possibility of some fix for Greece's problems bolstered a sense that the economy could continue to rebound. Major stock market indexes rose more than two percent in February for their best performance since November. Stocks have jumped in the past 12 months but investors have still been concerned that a rebound in the economy will stall.

Trading volume was light yesterday, which is a sign that many investors are not taking part in the buying.

Dave Hinnenkamp, chief executive KDV Wealth Management in Minneapolis, said the deals signal that companies are becoming more confident in the economic recovery and willing to spend some of their cash.

"They are at a point now where they can see that the light at the end of the tunnel isn't a train," Mr. Hinnenkamp said.

According to preliminary calculations, the Dow rose 78.53, or 0.8 percent, to 10,403.79, its highest close since January 20.

The broader S&P 500 index rose 11.22, or one percent, to 1,115.71. It is now up 0.1 percent for 2010. The Nasdaq rose 35.31, or 1.6 percent, to 2,273.57. It is up 0.2 percent for the year.

The Russell 2000 index of smaller companies rose 14.09, or 2.2 percent, to 642.65.

Bond prices mostly rose, pushing down yields. The yield on the benchmark 10-year Treasury note fell to 3.61 percent from 3.62 percent late on Friday.

The dollar rose against other major currencies, while gold fell.

Crude oil fell 96 cents to settle at $78.70 per barrel on the New York Mercantile Exchange.

In stocks, AIG rose $1.01, or 4.1 percent, to $25.78. AIG reported disappointing fourth-quarter results Friday, which tempered gains in the market on the final day of trading for February.

OSI Pharmaceuticals jumped $19.23, or 51.9 percent, to $56.25. Astellas Pharma Inc. said it would take a $3.5 billion takeover bid to OSI shareholders after management rejected the offer.

SanDisk increased its first-quarter revenue forecast. Shares of the maker of flash memory cards, which are used in electronics like cameras, rose $3.48, or 11.9 percent, to $32.63.

Millipore Corp. jumped $10.49, or 11.1 percent, to $104.90 after Germany's Merck KGaA said it would pay $6 billion to acquire the maker of biotechnology equipment.

MSCI Inc. struck a deal to acquire RiskMetrics Group Inc. for about $1.55 billion in cash and stock. The companies sell services to financial companies. MSCI fell $1.39, or 4.6 percent, to $28.59, while RiskMetrics rose $2.46, or 13.2 percent, to $21.09.

Manny Weintraub, president of Integre Advisors in New York, said investors are still trying to determine what an economic recovery will look like. In past downturns, the rebound is often more swift than investors expect. But economic reports in the past two months have signalled a more tepid recovery.

Still, Weintraub sees the buyouts as a good sign that solid companies can obtain financing a year after stocks tumbled to 12-year lows.