Stocks closed higher as Citigroup's earnings lifted bank stocks ahead of a cluster of earnings reports this week, including Apple and IBM, which report after the market closes.
TheDow Jones Industrial Averagerose 80.91 points, or 0.7 percent, to 11,143.69. Bank of America and JPMorgan rose, while Intel and Home Depot fell.
The S&P 500 Index rose 8.52 points, or 0.7 percent, to 1,184.71. The Nasdaq rose 11.89 points, or 0.5 percent, to 2,480.66. TheCBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 19.
All major indexes reached new five-month highs and are up for the month. The Dow has gained 3.3 percent, the S&P 500 has gained nearly 4 percent, and the Nasdaq has gained more than 4.5 percent.
The dollar, meanwhile, slipped against a basket of currencies, after rising earlier in the session. Banks, utilities and health care sectors rose, while consumerdiscretionary stocks fell.
"Leadership here really seems to be centered on the financials, I think in part because you had Citigroup come through this morning with numbers better than expected, and their story did not exacerbate the worries about some of the foreclosure concerns," said Craig Peckham, equity product strategist at Jefferies.
Market participants were also continuing to weigh the size, timing and probability of monetary easing provided by the Federal Reserve, Peckham said.
"There a persistent, high level of expectation and enthusiasm for asset prices," given the potential for the Fed to boost the economy, he added.
The week ahead features earnings releases from a fifth of the stocks in the S&P 500, including Apple and IBM . A number of Dow components also report throughout the week. So far, many earnings reports, ranging from JPMorgan to Citigroup, Google , and Hasbro, have come in strong.
"It underscores the corporate part of the economy is in very, very good health," Jeffrey Palma, a market strategist at UBS Securities said on CNBC.
Palma, however, is concerned expectations are too high going into next year.
"We're seeing growth forecasts for next year being predicated on another expectation of profit margin increases," Palma said.
Citigroup's shares rose more than 3 percent after the bank reported quarterly earnings that beat analyst expectations. Net income for Citi, however, dropped 20 percent from the quarter before.
All eyes have been on the banking sector as financial stocks fell sharply last Thursday and Friday. Investors were worried the fallout from the growing crisis could lead to big costs for companies.
In a note to clients, J.P. Morgan said errors in foreclosure-processes that could lead to banks having to repurchase home loans could cost the banking industry up to $120 billion.
Citi's results appeared to have lifted the banking sector Monday, as the KBW Banking Index rose more than 2 percent.
Bank of America and Wells Fargo were among the banks trading higher Monday. Both post earnings results later this week. Bank of America's shares spiked higher after news it would resume foreclosuresin 23 states on Oct. 25.
Investment banks will also report this week, including Goldman Sachs and Morgan Stanley .
Hasbro's shares, meanwhile, after the toy-maker reported net income and revenue that beat expectations on strong sales of preschool toys.
Halliburton's shares, however, sank despite posting good results because write-downs brought earnings-per-share below expectations.
Meanwhile, McMoRan Exploration's shares slumped after the oil-and-gas explorer reported a decline in revenues.
Elsewhere in energy news, most coal stocks fell after Goldman Sachs cut its rating on the sector to "neutral," citing a 14 percent jump in shares of coal companies since July 1. Specifically, Goldman kept its "buy" rating on Peabody Energy , but reduced its rating for Alpha Natural Resources to "neutral," and kept its "neutral" ratings for Arch Coal , Walter Industries and Massey Energy .
Meanwhile, oil prices rose from the lowest levels in a week to close above $83 a barrel on Monday, thanks to strikes at French refineries.
Apple and IBM are both higher Monday ahead of earnings releases after the market closes.
Analysts expect Apple’s fourth-quarter earnings to rise driven by growing iPhone sales. A recovery in global tech spending is expected to have buoyed IBM’s third-quarter earnings.
Tech stocks as a sector rose, but the stocks of semiconductors slumped. Texas Instruments , Advanced Micro Devices , and MicronTechnology were all lower.
Terrestar plummeted more than 50 percent after a report in the Wall Street Journal that the mobile communications firm may file for Chapter 11 protection under the U.S. Bankruptcy code.
Highways Holdings was among stocks topping the Nasdaq as the component supplier received a $4.56 billion order to make protective cases for mobile phones.
Shares of J.C. Penney slumped after the department-store retailer put in a poison pill that prevents any other shareholder from exceeding a 10 percent stake in the company. Pershing Square Capital Management, headed by activist investor Bill Ackman, has recently accumulated a 16.5 percent position in the company.
Among health-care stocks, Allergan jumped after the Food and Drug Administrtion said Botox, its top-selling product, can be used to treat migraines. Meanwhile, Aastrom Biosciences rose after receiving fast-track treatment from the FDA for a drug that treats an artery disease leads to amputations and is potentially fatal.
Shares of Jack in the Box rose more than 2 percent after the restaurant chain was raised to "outperform" from "sector perform" by RBC.
Rock of Ages shares soared after news the granite quarrier agreed to be taken private by Swenson Granite for about $39 million.
H&R Block sank after news the retail tax preparer sued the U.S. arm of HSBC Holdings to force the bank to provide its instant refund anticipation loans and checks during tax season.
In M&A news, shares of Northeast Utilities fell after news the utility agreed to buy New England utility company NStar for $4.3 billion. And St. Jude Medical bought AGA Medical Holdings for $20.80 per share in a cash and stock transactionvalued at about $1.3 billion. The deal includes the assumption of about $225 million in debt.
Other than earnings news, traders will be looking out for data on housing starts, to be released on Tuesday, and a key regional manufacturing survey, to be released on Thursday.
On Monday, the National Association of Homebuilders' housing market sentiment indexrose to 16 in Octoberfrom 13 in September, the first rise in five months.
The positive report lifted the market, but didn't do much for housing stocks, as the SPDR S&P Homebuilders Exchange-Traded Fund fell.
Industrial production fell 0.2 percentin September, instead of rising 0.2 percent as expected. Capacity utilization, meanwhile, slipped to 74.7 percent, 4.2 percentage points above a year ago, and close to expectations.
Dallas Federal Reserve President Richard Fisher said on CNBC early Monday that the Fed can't help the economy alone, and Citi reported better-than-expected earnings. Fisher also said the Federal Reserve needs the help of fiscal and regulatory authoritiesif it is to help the US economy grow at a faster pace.
Later in the day, Atlanta Fed President Dennis Lockart said the U.S. economy is weak enough to warrant further monetary easingby the Federal Reserve.
Federal Reserve Chairman Ben Bernanke said on Friday that high unemployment and low inflation point to a need for a further easing of U.S. monetary policy, fueling speculation that the Fed might take further steps to boost the economy as early as November.
On the Calendar Next Week:
TUESDAY: Housing Starts, Grant's Conference, CFTC Open Meeting on Dodd-Frank; Chicago Fed President Evans speaks; before-the-bell earnings from BofA, Coca-Cola, Goldman Sachs, J&J, AEP, Bank of NY Mellon, Harley-Davidson, Lockheed Martin, NY Times; after-the-bell earnings from Yahoo, Sallie Mae and Western Digital.
WEDNESDAY: Mortgage applications, oil inventories, Beige book; Apple Mac Event, Richmond Fed. President Lacker speaks, Philadelphia Fed President Plosser speaks; before-the-bell earnings from Abbott Labs, Boeing, BlackRock, Morgan Stanley, United Technologies, Wells Fargo, M&T Bank, US Airways; after-the-bell earnings from eBay, E*Trade, Netflix and Seagate Technologies.
THURSDAY: ECB Meeting, jobless claims, leading indicators, natural gas inventories, money supply, Kansas City Fed President Hoenig speaks, CBO Director Elmendorf speaks; before-the-bell earnings from AT&T, Caterpillar, Credit Suisse, Eli Lilly, Novartis, Travelers, UPS, Continental Airlines, PNC Bank, Southwest Airlines, and Xerox; after-the-bell earnings from American Express and Amazon.
FRIDAY: G20 Finance Ministers & Central Bank Governor's Meeting; before-the-bell earnings from Verizon, Exelon, Ingersoll-Rand and Schlumberger.
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