Stocks gained modestly as investors braced for the start of earnings season amid M&A activity.
The Dow Jones Industrial Average rose more than 40 points, after ending last week flat.
Among Dow components, Travelers and 3M led, while Caterpillar fell.
The S&P 500 rose slightly, while the Nasdaq slipped. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.
Among key S&P sectors, consumers staples and health care rose, while utilities and energy declined.
"Everybody is focused on earnings and that's really it," said Rick Fier, vice president at Conifer Securities.
"I think clients are under the impression that the easiest money has been made in the market, and that stock picking will be much more of an issue in the next quarter or two, and that comps for these companies will be harder to achieve," Fier added.
As earnings are released, investors will be zeroing in on how companies anticipate rising commodity prices, and the multiple disasters in Japan, will affect their results in the future, he said.
Earnings season could be volatile because the market isn't showing a clear direction heading into the releases, he said. Investors now are trimming back positions, and getting ready for earnings to provide some clarity on the market's direction, which he said won't come for another two weeks.
Alcoa, the world's leading aluminium producer, unofficially opens earnings season when it releases results after the market closes on Monday. The company is expected to report quarterly earnings of 27 cents per share on revenue of $6.07 billion, according to Thomson Reuters.
JPMorgan Chase , Bank of America and Google will report earnings later in the week.
Google, meanwhile, traded flat after Oppenheimer reduced its 2011 margin assumptions for the search engine giant. The brokerage said, however, that first quarter results could mark a bottom in the stock. IBM also fell after Canaccord Genuity cut the tech giant to "hold" from "buy."
Meanwhile, JPMorgan shares also traded flat to lower after news it was accused of breaking its duty to clientsby not warning clients with $500 million in an investment vehicle despite red flags warning it could collapse.
A couple of M&A deals grabbed the market's attention Monday. Global Crossing skyrocketed after news that Level 3 will buy the communications company for $23.04 a share, in a tax-free, stock-for-stock deal.
And Endo Pharmaceuticals has reached a definitive agreement to buy American Medical Systems , which sent its stock soaring. Endo will buy AMS for $30 a share, or $2.9 billion in cash, including the assumption and repayment of $312 million in AMS debt, the Wall Street Journal reported.
Tyco , meanwhile, jumped after news the diversified industrials products maker is a potential takeover target by Schneider Electric.
Biogen gained after news a drug for multiple sclerosis that it developed met its goal in a study.
The market also cheered news that a compromise budget agreement was reached on $38 billion in spending cuts late Friday. President Obama will deliver a long-term plan for deficit reduction on Wednesday, according to Reuters, as the White House and Congress prepare to concentrate on the 2012 fiscal year budget and on raising the $14.3 trillion limit on government borrowing authority.
Meanwhile, a 7.1-magnitude tremor triggered a tsunami warning, and forced the evacuation of workers from the crippled Fukushima nuclear plant on Monday, exactly a month after the quake and tsunami caused devastation in the country.
Commodities continued to trade at high levels, and to climb further, amid concerns about inflation, global unrest, and monetary policy in the U.S. The price of gold slipped from its highs but remained above $1,469 an ounce, while silver continued to rise above $41 an ounce.
The dollar meaning, fell, against a basket of currencies, which was contributing to the rise in precious metals.
Oil prices fell, but were still at high levels, as the African Union engaged in talks to end the fighting in Libya. London Brent crude fell to nearly $126 a barrel, while U.S. light crude fell below $112 a barrel.
Oil companies were largely lower on Monday, led by Denbury Resources , Occidental Petroleum and Anadarko Petroleum .
Federal Reserve Vice Chairman Janet Yellen speaks at 12:15 p.m. ET.
In Europe, the FTSE opened flat after the publication of the Independent Commission on Banking's (ICB) interim report into the future of the banking sector in London. The ICB stopped short of recommending banks break up their retail and investment arms.
On Tap Next Week:
MONDAY: Evans speaks, Yellen speaks; earnings from Alcoa and Chevron's interim results after the bell.
TUESDAY: International trade, import and export prices, 3-year Treasury note auction, Treasury budget, CFTC's Gensler testifies on derivatives regulation, Dudley speaks, Bank of NY Mellon shareholder meeting
WEDNESDAY: Weekly mortgage applications, retail sales, business inventories, oil inventories, 10-year Treasury note auction, Beige Book, United Technologies shareholder meeting; earnings from JPMorgan before-the-bell.
THURSDAY: Weekly jobless claims, PPI, 30-year Treasury bond auction, Kocherlakota speaks, Plosser speaks, Lacker speaks, Nestle shareholder meeting; earnings from Hasbro before-the-bell and Google after-the-bell.
FRIDAY: CPI, Empire state manufacturing survey, Treasury international capital, industrial production, consumer sentiment, credit card default rates reported; Evans speaks, Hoenig speaks, G24/International Monetary Affairs meeting; Earnings from Bank of America and Mattel before-the-bell.
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