Wall Street advanced Monday following reports of potential corporate deals -- including news that Washington Mutual might get a $5 billion investment from private equity firms.

Washington Mutual, the nation's largest thrift, is in talks with buyout shop TPG Inc. and other investors about selling a stake in itself in return for cash, according to The Wall Street Journal. The company, which has suffered big losses tied to subprime mortgages, would become the latest U.S. financial institution to reach such a deal.

In other dealmaking news Monday, Microsoft Corp. gave Yahoo Inc. a three-week deadline to agree to a takeover, or Microsoft plans to launch a proxy fight for control of the company.

Yahoo fell 40 cents to $27.96, while Microsoft rose 9 cents to $29.25. Yahoo said Monday the deal isn't in the best interests of its shareholders, and called Microsoft's proxy threat counterproductive.

Meanwhile, Swiss pharmaceutical maker Novartis AG said it will spend about $38 billion in a two-step bid for a majority stake in U.S. eye-care company Alcon Inc. Alcon rose $4.46, or 3 percent, to $152.90, and Novartis fell $1.47, or 2.8 percent, to $50.65.