* Boeing, Caterpillar drive industrials higher
* Micron raises Q3 forecast, leading chipmakers' rally
* M&A deals worth $27.6 bln also add to optimism
* GE up on $11 bln deal to merge transport unit with Wabtec
* Indexes gain: Dow 1.28 pct, S&P 0.71 pct, Nasdaq 0.49 pct (Changes comment, adds details, updates prices)
By Medha Singh
May 21 (Reuters) - U.S. stocks climbed on Monday after the United States and China put their trade differences "on hold" to work on a wider agreement, while sentiment was also buoyed by the nearly $28 billion worth of merger activity.
The truce sparked a broad rally, with all the 11 major S&P sectors higher and the small-cap Russell 2000 hitting a record high for the fourth session in a row.
U.S. Treasury Secretary Steven Mnuchin said on Sunday the United States and China had agreed to drop their tariff threats, while China on Monday praised a significant dialing back of tensions.
"I suspect that we'll continue to trend higher sans some major disappointing news," said Gordon Charlop, managing director at Rosenblatt Securities in New York.
"This is an indication of what we'll see near term, because we are through earnings, relatively light on macro data, and with geopolitics, it seems like some of the emotion has been reduced between now and the Korean summit."
The industrial sector advanced 1.6 percent. Boeing , which sells about a fourth of its commercial aircraft to Chinese customers, jumped 3.3 percent, the biggest gainer on the Dow and providing the maximum support to the blue-chip index.
At 11:25 a.m. EDT the Dow Jones Industrial Average was up 316.70 points, or 1.28 percent, at 25,031.79, the S&P 500 was up 19.20 points, or 0.71 percent, at 2,732.17 and the Nasdaq Composite was up 35.76 points, or 0.49 percent, at 7,390.10.'
General Electric rose 3.1 percent on an $11.1 billion deal to merge its transportation business with rail equipment maker Wabtec, which jumped about 5 percent to a near three-year high.
Still, not all U.S. business leaders were happy with the trade war truce, with some cautioning that Washington would find it tough to rebuild momentum to address what they see as troubling Chinese policies.
AK Steel and U.S. Steel both fell about 3.5 percent following a delay in implementing tariffs on Chinese imports.
Micron surged 3.2 percent, the most on the S&P, after the chipmaker lifted its current-quarter forecast.
The easing of the trade dispute also boosted chipmakers, whose major clients include Chinese firms, with the Philadelphia chip index gaining 0.8 percent. The technology sector rose 0.7 percent.
Tesla jumped 3.9 percent on pricing of Model 3's fully-loaded version and after brokerage Berenberg raised its already bullish price target.
Regional lender MB Financial jumped 13.3 percent after agreeing to be bought for $4.87 billion by Fifth Third Bancorp, which fell 7.7 percent, the most on the S&P.
Advancing issues outnumbered decliners by a 2.61-to-1 ratio on the NYSE and a 1.79-to-1 ratio on the Nasdaq.
The S&P index recorded 32 new 52-week highs and three new lows, while the Nasdaq recorded 135 new highs and 22 new lows. (Reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila)