U.S. stocks closed sharply higher on Monday amid an unexpected stimulus from China's central bank as investors kept eyeing corporate earnings.
"We're looking at a bounce because of options expiration on Friday and China's stimulus," said Peter Cardillo, chief market economist at Rockwell Global Capital. "The move this morning is technical, and because it is technical I'm cautious."
On Sunday, China's central bank lowered the reserve requirement ratio for all banks by 100 basis points.
The wider-than-expected cut was the People's Bank of China's second reduction in two months, and marks a continuing effort by the world's second-largest economy to combat slowing growth.
"I'm completely fascinated by how we change topics every day," said Kim Forrest, senior equity analyst at Fort Pitt Capital. "On Friday we were concerned about Greece. Today, we're concerned about China."
The Nasdaq led all major indexes after posting its best day since February 10. The index closed up 62.79 points, or 1.27 percent, at 4,994.60 as Facebook shares soared 2.87 percent, their best one-day performance since February 19.
The Dow Jones Industrial Average, led by shares of IBM, had its best day since March 30 after closing up 208.30 points or, 1.17 percent, at 18,034.60. The index also rose as much as 266 points during the session.
The S&P 500 closed up 19.10 points, or 0.92 percent, at 2,100.28, led by Information Technology and Utilities. The index is now less than 1 percent away from its all-time intraday high of 2,119.59.
Nevertheless, Peter Boockvar, chief market analyst at The Lindsey Group, said "it's all about earnings this week."
Of the 59 S&P 500 companies that had reported by last week, 75 percent had topped profit expectations, above the 70 percent average for the last four quarters, according to Thompson Reuters. However, only 45 percent of companies beat revenues estimates, compared with 58 percent in the last four quarters.
Several companies posted quarterly earnings report Monday morning, including Morgan Stanley, Hasbro, Halliburton and SunTrust. IBM will deliver quarterly results after the bell.