U.S. crude oil futures settled down $1.32, or 3.43 percent, at $37.18 a barrel, after briefly dipping below $37 earlier in the session.
As of the close, trade volume across the exchanges was just above 6 billion, on pace for the lowest trade volume day of the year so far.
The Nasdaq composite and Dow Jones industrial average recovered opening losses to eke out gains. Boeing contributed the most to gains in the Dow, while a rise in shares of Gilead Sciences, Amazon and Starbucks led the Nasdaq in the close.
"You're starting to see some of the Nasdaq and Nasdaq 100-type stocks lead the way higher. To me it feels like this is late in the game. People being positive ahead of BOJ and the Fed. ... They don't want to be left out," said Adam Sarhan, CEO of Sarhan Capital.
The Bank of Japan is scheduled to conclude its meeting overnight ET, while the Federal Open Market Committee kicks off its two-day meeting Tuesday.
The S&P 500 failed to hold gains in the close, ending about 2.5 points lower but holding a touch above its 200-day moving average. Energy and materials each closed more than half a percent lower to lead decliners. Consumer discretionary was the top advancer.
Leading the sector was Starwood Hotels & Resorts, which gained 7.8 percent after the firm said it received an unsolicited acquisition proposal for $76 a share.
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The major averages opened slightly lower and crept higher throughout the day.
"I guess with oil down we're taking a little breather here," said Peter Boockvar, chief market analyst at The Lindsey Group.
"I think this week is really going to be determined by the Fed," he said.
The major data for the week include retail sales due Tuesday, ahead of the highly anticipated Fed meeting statement and press conference scheduled for Wednesday. No move on rates is expected, but policymaker commentary will be scrutinized for indications on the path of tightening.
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Treasury yields edged off session lows, with the 2-year yield near 0.96 percent and the 10-year yield at 1.97 percent.
The U.S. dollar index held slightly higher, with the euro at $1.1085 and the yen at 113.82 yen against the greenback.
Oil extended losses as hopes of a coordinated production freeze faded.
The Iranian News Agency Shana quoted Russian Energy Minister Alexander Novak saying Russia accepts Iranian rights to increase oil output post sanctions, according to Reuters.
Over the weekend, Iran Oil Minister Bijan Zanganeh said the country would join discussions among other producers about a possible oil production freeze after its own output reached four million barrels per day, according to a Reuters article citing Iran's ISNA news agency.
"I think that got investors a little worried. That's got crude on the defensive now," said John Caruso, senior market strategist at RJO Futures.
The major U.S. averages closed sharply higher Friday, with the S&P 500 and Dow Jones industrial average both topping their 200-day moving averages, which traders are watching as a resistance level.
A rise in oil prices and a more positive view of Thursday's European Central Bank stimulus announcements helped U.S. stocks post their first four-week win streak since November.