Stocks rallied in the final hour to finish near session highs Monday, erasing their earlier losses in choppy trading, following an FT report that China was in talks with Italy to purchase its bonds.
Stocks were trading lower for most of the day amid ongoing worries over Greece's mounting debt and as French banks braced for a possible downgrade by Moody's.
The Dow Jones Industrial Average gained 68.99 points, or 0.63 percent, to close at 11,061.12, rebounding from a triple-digit loss.
Intel and 3M were the biggest gainers on the blue-chip index.
The S&P 500 rose 8.04 points, or 0.70 percent, to end at 1,162.27. The Nasdaq rallied 27.10 points, or 1.10 percent, to finish at 2,495.09.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, was above 40.
Most S&P sectors finished higher, led by techs and financials. Materials ended lower.
Italy’s government is looking to China to see if they will make "significant" purchases of the debt-ridden nation's bonds and investments in strategic companies, according to the Financial Times.
According to Italian officials, China Investment's chairman Lou Jiwei, visited Rome last week for talks with finance minister Giulio Tremonti and Italy’s Cassa Depositi e Prestiti, a state-controlled entity that has established an Italian Strategic Fund open to foreign investors, according to the report.
Italian officials said further negotiations are expected to take place soon.
“[Italy’s move] seems logical—when you need money, you go to the guys that have it," said Brian Battle, vice president of trading at Performance Trust Capital Partners. “It’s good news that Italy’s seeking a solution, but it’s bad that they need a solution.”
European shares tumbled to close at a two-year low, dragged by French banks over a possible credit rating downgrade from the Moody's agency.
Shares of Banco Santander and Deutsche Bank tumbled.
Theresignation of the European Central Bank’s chief economist Juergen Starklast week also undermined confidence, with speculation rife that his departure will further complicate the response to the debt crisis.
“This week will be driven by Europe,” said Battle. “We’re below 1,150 on the S&P which is an important level and 1,125 will be the next stop…the close will be very critical today.”
