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* China exports handily top expectations
* Syria welcomes Russian chemical arms arsenal proposal
* Koch Industries to buy Molex for about $7.2 billion
* Indexes up: Dow 0.8 pct, S&P 0.8 pct, Nasdaq 1 pct
By Rodrigo Campos
NEW YORK, Sept 9 (Reuters) - U.S. stocks rose on Monday to extend last week's advance as upbeat Chinese data and merger activity boosted sentiment, and concerns eased about an imminent Western strike against Syria.
Basic materials shares led gains on the S&P 500 after China's August exports handily beat market expectations while consumer inflation held steady.
"Even if you are skeptical of Chinese data, this fits a pattern of global demand turning the corner, inching higher," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
Deal news gave a further boost to market confidence. Koch Industries will buy electronic connectors maker Molex for about $7.2 billion. Separately, Ares Management LLC and the Canada Pension Plan Investment Board reached a deal to buy privately owned U.S. luxury retailer Neiman Marcus for $6 billion.
"There is a nice parade of deals and that is always suggestive of a healthy market," said Krosby.
Molex shares surged 31.4 percent to $38.54 and the S&P 500 technology sector gained 1.2 percent.
The Dow Jones industrial average rose 121 points or 0.81 percent, to 15,043.5, the S&P 500 gained 12.45 points or 0.75 percent, to 1,667.62 and the Nasdaq Composite added 36.259 points or 0.99 percent, to 3,696.268.
A Russian proposal to place Syria's chemical weapons under international control was welcomed by the government in Damascus, who praised the Kremlin for seeking to "prevent American aggression."
Markets have been on edge about a possible U.S.-led military attack on Syria in retaliation for its alleged use of chemical weapons against its civilian population.
Brent crude prices, up for four consecutive weeks, fell 1.9 percent to $113.92 per barrel in their largest daily drop since mid June.
The S&P 500 has risen five straight sessions for a near 2 percent advance, but analysts said numerous events, from Syria to a possible trimming of stimulus by the Federal Reserve and the debt ceiling debate, could easily create volatility.
Economists at a majority of U.S. primary dealers expect the Fed to announce next week that it will start to pare back its $85-billion monthly bond purchases aimed at stimulating the economy.
Shares of homebuilders rallied on bets of a cap on mortgage rates, which have risen recently, as U.S. Treasuries yields fell from two-year highs as more investors bet the Fed may reduce bond purchases by less than previously thought.
The PHLX housing sector index jumped 3.4 percent to its highest in a month with PulteGroup was up 7.1 percent at $16.57.
Apple led technology shares with a 1.8 percent gain to $506.94 in anticipation of an event on Tuesday.
U.S.-listed shares of BlackBerry Ltd gained 5.6 percent to $11.44 after the Sunday Times reported the company's largest shareholder, Prem Watsa, had assembled billions in backing from Canada's biggest pension funds for a possible rescue deal for the battered smartphone maker.
Isis Pharmaceuticals Inc jumped 11.6 percent to $31.17 after the company said it had reached a collaboration with Biogen Idec Inc on treatments for neurological disorders. Biogen shares edged up 0.6 percent to $226.55.
Delta Air Lines Inc will join the S&P 500 index after the close of trading Sept. 10, replacing BMC Software . Delta shares surged 7.3 percent to $21.35.