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.