A share-buyback from Dow component Intel helped revive optimism, which has been reinforced by more strong profit reports. Three-quarters of the 84 S&P 500 companies that have reported results so far in this earnings season have beaten analysts' estimates.
"Strong earnings are what's pushing the market higher and I don't see a correction in sight until the (earnings) season is over," said Keith Springer, president of Springer Financial Advisors in Sacramento, California.
"Even after the earnings, I don't think we will see a major correction but rather a pause or a breather since there isn't a major fundamental issue."
Volatility indicators in the options market also suggested a turnaround after the S&P's decline last week when the benchmark index fell after seven straight weeks of gains.
But trading volume was the lowest of the year at 7.02 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq. Last year's estimated daily average was 8.47 billion shares.
On Monday the Dow Jones industrial average (.DJI) ended up 108.68 points, or 0.92 percent, at 11,980.52. The Standard & Poor's 500 Index (.SPX) was up 7.49 points, or 0.58 percent, at 1,290.84. The Nasdaq Composite Index (.IXIC) was up 28.01 points, or 1.04 percent, at 2,717.55.
The blue-chip Dow neared the psychologically
important 12,000, pulled higher by natural resources stocks like Alcoa while the Nasdaq gained more than 1 percent on large-cap tech shares.
Shares of Alcoa Inc (AA.N) jumped 4 percent to $16.43 after its chief executive said he sees continued demand for aluminum in 2011.
The S&P materials sector (.GSPM) advanced 1 percent. Copper prices rose as concerns about a decrease in Chinese demand were replaced by worries over supply constraints.
Intel Corp (INTC.O) shares rose 2 percent to $21.24 after it raised its dividend by 15 percent and authorized another $10 billion for stock repurchases, a sign larger technology companies with slower growth may be looking for ways to reward investors.
The Credit Suisse Fear Barometer, a gauge for investor sentiment, hit a six-month high late last week and the CBOE Volatility Index (.VIX), a similar gauge, also jumped more than 10 percent from its lowest point over the past week.
"When we've seen a high CSFB (Credit Suisse Fear Barometer) and jumpy VIX in the past, it has usually meant a short-term rebound in the S&P," said Jason Goepfert of SentimenTrader in a report.
Chip-makers recovered from last week's fall with Nvidia Corp (NVDA.O) shares jumping 11.4 percent to $24.76 after Barron's said its stock could nearly double in price this year.
VMware Inc (VMW.N) shares were down 2.3 percent at $86.50 in extended trade, reversing earlier gains after the company reported after the bell that its quarterly profit rose sharply.
Shares of credit card company American Express (AXP.N) fell 1.4 percent to $45.15 and chipmaker Texas Instruments (TXN.N) slipped 1.8 percent to $34.02 in extended-hours trading after the companies reported results.
But shares of oilfield services company Halliburton Co (HAL.N) gained 1 percent to $39.55 in regular trading after reporting earnings.
J.C. Penney Co Inc (JCP.N) shares jumped 6.8 percent to $32.40 on news activist investor William Ackman will join the department store operator's board next month, heading off a potential fight over the direction of its turnaround.
Advancing stocks outnumbered declining ones on the NYSE by 2,114 to 882. On the Nasdaq, advancers beat decliners 1,721 to 939.
(Additional reporting by Doris Frankel in Chicago; Editing by Kenneth Barry)