Financial stocks gained as sentiment for the beleaguered group turned somewhat more optimistic as investors fished for a near-term bottom.
Bear Stearns, the investment banking firm at the center of recent woes in the mortgage markets, saw share rise more than 4%. Financial powerhouse Citigroup also traded higher.
"As long as we don't get something significantly negative in the near term, financials may have found a bottom," said Mike Malone, trading analyst at Cowen and Co. "At this point I don't think anyone knows fully how bad this may get or could get; we haven't seen a shift in fundamentals but a shift in sentiment, which is very hard to gauge."
Meanwhile, shares of Fannie Mae and Freddie Mac rose for the second straight session on heavy trading volume on speculation the government may lift portfolio restrictions on the government-sponsored entities.
Shares of other financial companies with significant leverage to the mortgage markets also moved higher, including Countrywide Financial , MGIC Investment, Washington Mutual and IndyMac Bancorp.
Mentor shares surged 15% after the maker of breast implants reported first-quarter earnings well above Street estimates and raised full-year guidance. Adjusted earnings rose 45% to 48 cents a share, compared with analysts' average estimate of 34 cents a share.
The Santa Barbara, Calif.-based company said its bottom line was boosted by sales of its MemoryGel silicone breast implants, which were approved for sale by the U.S. Food and Drug Administration in November 2006.
Piper Jaffray upgraded Mentor shares to "market perform" from "underperform."
Wynn Resorts shares jumped higher after reporting quarterly earnings well above analysts' consensus estimates. The casino operator said growth was fueled by growth in Las Vegas and Macau, China's gambling haven.
Shares of BMC Software moved higher after the business software maker reported strong quarterly results Monday evening. The company posted adjusted earnings of 37 cents a share, compared with the Wall Street forecast of 34 cents a share.
Bear Stearns analyst John DiFucci said BMC's results "were about as clean we've seen from this company in quite some time" and upgraded the stock to "peer perform" from "underperform."
DiFucci said the company's core business of mainframe database tools has likely stabilized.
"Assuming the bleeding in the mainframe database tools market has subsided, we believe that BMC shares are fairly valued in the low to mid $20s," he said. "While that raises the possibility of further downside from here, we believe that the solid results for the June quarter and likely solid cash flow for the September quarter will buoy the shares over the next several months."
Among downside movers, Marsh & Mclennan moved lower after the insurance broker announced soft second-quarter earnings.
Peter Kang is a markets writer at CNBC.com and can be reached at firstname.lastname@example.org.