Morgan Stanley wrapped up earnings season for the big USA banks with a better-than-expected quarterly profit, driving modest gains in its shares.
Japan's benchmark Nikkei 225 jumped 0.7 percent to 24,050.53 as the yen weakened against the US dollar.
The S&P 500 has rallied strongly in the new year, gaining 4.8 percent so far and posting only two sessions of losses.
Investors were surprisingly optimistic in the face of a possible government shutdown on Friday.
The Dow Jones Industrial Average (NYSEARCA:DIA) climbed 322.79 points, or 1.3% to close at 26,115.65.
The S&P 500 posted 84 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 120 new highs and 22 new lows. The Nasdaq closed up 1 percent at 7298.28, also a record.
IBM gained 2.9 per cent after analysts upgraded their price target for the company's stock, and chipmaker Intel rose a similar amount, while aviation giant Boeing jumped 4.7 per cent after announcing a joint venture to make aircraft seats.
In small-caps, the Russell 2000 Index closed at 1,586.36 for a gain of 13.39 points or 0.85%.
Stocks are closing higher on Wall Street, sending the DJIA to its first close above 26,000 points.
Alcoa tumbled 7 percent after the company reported a wider loss in the fourth quarter. Second was Merck & Co Inc, up 8.7 percent since January 4.
Republicans are seeking to pass a temporary extension in funding government operations to avert a shutdown. This trend is expected to continue in the coming weeks as Wall Street's earnings recovery continues. Only the 1991-92 winning stretch saw the stock market gain 1% in the month following the end of that winning run.
Goldman Sachs fell 1.8 per cent after reporting a steep quarterly drop in trading income. The stock declined $4.81, or 1.9 percent, to $253.65.
The Dow is up 1,396.43 points, or 5.7 percent. Australia's S&P/ASX 200 added 0.1 percent to 6,024.40 and South Korea's Kospi rose 0.4 percent to 2,524.62.
Gold rose $2.10 to $1,339.20 an ounce.