US STOCKS-Corporate takeover news lifts Wall Street

* Xerox will buy ACS; Abbott to buy Solvay's drugs unit

* DJIA headed for best quarter since 1998

* Dow up 1.3 pct; S&P 500 up 1.7 pct; Nasdaq up 2 pct

* For up-to-the-minute market news, click [STXNEWS/US] (Updates to mid-afternoon, changes byline)

By Ellis Mnyandu

NEW YORK, Sept 28 (Reuters) - U.S. stocks rose on Monday, halting a three-day losing streak, as a spurt of corporate takeovers in the technology and healthcare sectors fueled optimism about share values.

Mergers and acquisitions are typically viewed as bullish as it suggests companies are more optimistic about the business outlook.

A number of deals were announced. Xerox Corp agreed to buy Affiliated Computer Services Inc , and Abbott Laboratories said it would pay $6.6 billion for Solvay's drug unit.

"It's always a positive sign when you see companies putting money to work, whether they buy other companies, invest in new plants, (or) buyback their own stock," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut.

"With depressed stock prices, like we've had over the past year-and-a-half, a lot of companies will find it cheaper to buy a company than to grow that same type of company organically. It's a more effective way to put money to work sometimes."

Abbott climbed nearly 3 percent to $48.69 while Affiliated Computer advanced 11.4 percent to $52.64. Xerox, which valued the cash-and-stock deal for Affiliated at an initial $6.4 billion, sank 18.4 percent to $7.33. For details on Xerox, see [ID:nN2863430]. For details on Abbott, see [ID:nLS426471]]

With Monday's gains, the Dow Jones industrial average is up about 16 percent in the quarter so far, which would make it the index's best such period since the fourth quarter of 1998.

The Dow Jones industrial average <.DJI> rose 129.92 points, or 1.34 percent, to 9,795.11. The Standard & Poor's 500 Index <.SPX> jumped 17.51 points, or 1.68 percent, to 1,061.89. The Nasdaq Composite Index <.IXIC> shot up 41.50 points, or 1.98 percent, to 2,132.42.

In the last three sessions, the S&P 500 had declined more than 2 percent after rallying nearly 60 percent from the 12-year lows of early March.

Other deals on Monday included U.S. diversified health care company Johnson & Johnson's buy of an 18 percent stake in biotech firm Crucell for 302 million euros ($444 million) as part of a flu vaccine development deal, the Dutch company said on Monday. [ID:nLS212056]

Crucell fell 6 percent to $22.29 on Nasdaq, but J&J, a Dow component, was up 1.2 percent at $61.36 on the New York Stock Exchange.

Apple Inc rose 2 percent to $185.91 after China Unicom <0762.HK> said it would sell Apple's iPhone in China, starting in October. [ID:nHKG249644] France Telecom's Orange also said it would sell the product later this year.

Apple was the Nasdaq's top boost, followed by chipmaker Qualcomm Inc , up 2.7 percent at $45.88. The semiconductor index <.SOXX> was up 2.4 percent.

Dow Chemical Co advanced 4 percent to $26.16 after it said the Federal Trade Commission had cleared the way for Dow's $1.68 billion sale of Morton Salt to Germany's K+S AG. [ID:nN2872015]

Other industrial standouts were planemaker Boeing Co , up 3.3 percent at $53.23, and diversified manufacturer 3M Co , up 1.8 percent at $75.15.

The Jewish holiday of Yom Kippur observed on Monday kept volumes lighter. The end of the third quarter on Wednesday may spur volatility as fund managers engage in what is known as "window dressing" -- when they sell laggards in favor of outperformers to spruce up portfolios at quarter's end. (Editing by Padraic Cassidy)