Stocks trimmed gains, but remained significantly higher, as techs and materials lifted the market and investors awaited a handful of major earnings later this week.
The Dow Jones Industrial Average rose more than 90 points—inching closer to the psychologically important 12,000 level—after ending higher last week, amid a mixed performance for the major market indexes.
Alcoa , IBM and Cisco gained, while Bank ofAmerica slid.
The S&P 500 rose to more than 1,288, and the tech-heavy Nasdaq advanced nearly 1 percent. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 18.
Among key S&P 500 sectors, technology, industrials and materials advanced.
The euro gained for a fifth session, climbing to a fresh two-month high against the dollaras investors overcame earlier doubts on the currency's prospects and pushed it through key technical and trading levels on expectations of higher euro zone interest rates.
The Dow last closed above 12,000 on June 19, 2008, when it finished the session at 12,063.09.
The market's biggest movers on Monday were defensive, large cap names, and not smaller, so-called momentum stocks. One reason may be that investors want to get out of risky names as the market hits highs, but they want to stay invested in equities, said Marc Pado, U.S.market strategist at Cantor Fitzgerald.
"Money doesn’t want to leave the market, it's not fleeing to cash or bonds, but (investors are )seeking out equity names that are more defensive: health care, food, maybe some pharmaceutical stocks—conservative names that take you out of the risk but don’t take you out of the market," Pado said.
Material stocks led the market higher Monday, aided by the stronger dollar. Alcoa was among the leaders, as CEO Klaus Kleinfeld said Monday that the aluminum producer expects Asian countries, including China, will drive strong demandthis year. Kleinfeld told reporters on the sidelines of a conference in Riyadh that demand growth is projected to rise 12 percent, Reuters reported.
Freeport McMoran and Rio Tinto also gained more than 3 percent each. Gold prices, meanwhile, rose to about $1,344 an ounce as the precious metal's third consecutive weekly loss attracted some buyers back to the market.
Technology stocks were among the strongest performers, although some of the sector's highest flyers—including VMWare, QualComm and Citrix—remained weak in the wake of F5 Network'spoor outlook last week.
Meanwhile, shares ofanother high-flyer, Salesforce.com, which provides cloud computing services, fell nearly 4 percent to the bottom of the S&P 500 after a report in Barron's said the "momentum" stock could fall by 20 percent. The article said analysts were ignoring the company's high valuations, and potential for a "huge employee-options expense."
"There was definitely some fear F5 did not beat...and that had a lot of people gut-checking on the high flyers," said Neal Karchem, senior equity analyst at Bel Air Investment Advisors. "All the big winners from last year seemed to give some back."
VMWare releases earnings after the bell today, while EMC and Juniper deliver earnings on Tuesday, and Citrix and QualComm on Wednesday.
Bigger cap names, particularly among semiconductor stocks, fared better.
Intel shares rose after news the tech giant would increase stock buybacks by $10 billion, for a total of $14.2 billion.
Nvidia skyrocketed after Barron's said the chipmaker would double in price in 2011. Texas Instruments, which reports earnings later today, also gained.
The release of VMWare's earnings after the close will give the market a good indication of whether F5's results were industry-wide, or an anamoly, said Scott Redler, chief strategic officer of T3live.com.
"If they have a solid report and great guidance, there could be a short squeeze on a lot of those stocks," Redler said, referring to investors who held short positions in the stock in the wake of F5's earnings. A short position is a bet a stock's price will fall.
Shares of Molycorp soared after news the rare earth producer's shareholders will sell up to $500 million in shares. The company will sell $172.5 million in preferred shares at the same time, to fund expansion of the company's California mine.
Another week filled with big earnings reports kicked off with McDonald's posting earnings that came slightly below forecast, though the fast-food chain topped expectations on revenue.
Halliburton shares rose after reporting better-than-expected profit and sales. Rival Schlumberger also climbed after posting strong results on Friday. And FBR raised its price target on the firm to $110 from $97.
Oil prices slipped below $88 a barrel, breaking a key support level, as pressure from high inventories offset hope that rebounding economies would lift demand this year.
Philips tumbled however, after the electronics company warned that consumers in mature markets would be reluctant to spend this year. The group blamed weak TV sales for disappointing profit figures.
Meanwhile, GE shares jumped to hit their highest level since November 2008 after the parent company of CNBC posted a better-than-expected profitlast week, helped by strong emerging-market demand for heavy equipment, boosting the market and sparking optimism the economy was strengthening. In addition, both Deutsche Bank and Barclays raised their price targets on GE to $22 from $20.
Fellow Dow component American Express is slated to reportearnings after the bell, along with CSX , Amgen and Texas Instruments.
Among financial stocks, Citigroup slipped after news the government would sell 465.1 million Citigroup warrantsthat give the holder the right to buy Citi common stocks at a fixed price.
AIG was among the worst performers on the S&P, slipping nearly 3 percent.
Shares of Berkshire Hathaway gained after news in Barron's that the company, run by Warren Buffett, may pay a dividend in the next 12 to 18 months.