Stocks extended their gains Monday, with the Dow and S&P on track to break a three-day losing streak, ahead of a crucial vote on austerity measures in Greece and after banking regulators announced capital rules that were less burdensome than expected.
The Dow Jones Industrial Average gained, led by BofA , AmEx and Microsoft , after ending lower last weekamid continuing jitters over the euro zone debt crisis. The Dow is heading for its biggest daily gain in over two months.
The S&P 500 and the tech-heavy Nasdaq were higher. The CBOE Volatility Index, widely considered the best gauge of fear in the market, slipped below 21.
Techs, consumer discretionary and banks were the biggest gainers among the S&P sectors.
"The entire summer can be dictated by the next two weeks—Greece and jobs," said Todd Schoenberger, managing director of LandColt Trading.
“Greece is still the top on traders’ minds—the debate begins in Greece tonight and there are also organized protests,” noted Schoenberger. “There is nervousness and uneasy feeling, and you’re going to see volatility for the rest of the week up until Friday.”
The Greek parliament was debating a fresh austerity package but the government is fragile and analysts fear that it may not pass. The euro slipped against the dollarahead of the vote.
Meanwhile, French President Nicholas Sarkozy offered a solution for banks to roll over holdings of Greek debt for 30 yearsas the Greek government fought to support the austerity plan to avoid a default.
"We're still a couple years away from Greek default," Marc Chandler, currency strategist at Brown Brothers Harriman told CNBC. "I know many people think it's imminent, but the European officials will do everything they can to prolong [a default]...so that banks in Europe will be stronger and better prepared to deal with it."
Financials gained after regulators proposed higher tier one capital ratios for big and systemically important banks over the weekend in effort to stabilize the system.
Meanwhile, Rochdale Securities vice president for equity research Dick Bove said BofA stock is "massively undervalued."
Rivals Citigroup , GoldmanSachs and Morgan Stanley were also trading higher. But despite the day's rally, the sector is still the worst performer in 2011.
The Bank for International Settlements said interest rates must rise in order to fight global inflation and that delays in cutting budget deficits may make the sovereign crisis even worse.