The market was in the mood for a rally Monday after last week's slide, determined not to let anything stand in the way.
Financials and technology stocks led the way, while a shift in the oil market put a cap on the top end of crude's new range.
The Dow Jones Industrial Average gained more than 130 points, or 1 percent, to close at 12876.31. The S&P 500 index climbed 1.1 percent, while the Nasdaq jumped 1.8 percent.
The price of crude swung wildly between $123 and $126 a barrel before settling at $124.23 a barrel on the New York Mercantile Exchange.
The past few weeks have seen oil go up about $10 in a week then fall back the next week, but always pushing the range higher. The rally last week left oil up just shy of $126 a barrel, which may be the top end of this current range.
“Oil has gone to where … future oil is worth less than current oil after holding costs, which put a bearish sentiment on the oil market,” said Michael Cohn, chief investment strategist at Atlantis Asset Management. "That’s essentially given the impression that commodities inflation is over temporarily … creating a rotation where they sell commodity stocks off and bring up the stuff that’s been hit badly," Cohn said.
For sure, there is more optimism in the market, but Cohn notes that rally volume is thin. “I really don’t expect this market to burst out of its seams,” he said.
The dollar relinquished earlier gains against the euro but eked out a gain against the yen.
Keeping a lid on the dollar's gains were comments from Chicago Federal Reserve Bank President Charles Evans, in response to a question about when the Fed would start raising rates again. "There continue to be downside risks to economic growth," Evans told reporters after a speech at a college in Illinois. "We're still muddling through this." That seemed to contradict comments during the speech that monetary policy was "accommodative" and "appropriate" and that U.S. growth should improve in the second half. Evans isn't currently a voting member of the Fed's Open Market Committee.
Still, there was no stopping today's stock rally -- not even when Wall Street titan Jamie Dimon, head of JPMorgan Chase, said the credit crunch may be ending but a recession could be just beginning.
Dave Rovelli, managing director of equity trading at Canaccord Adams, said he sees "no reason to chase stocks" right now, citing the market's 11-percent gain over the past 7-8 weeks and $125-a-barrel oil. But, when it's time to go back in -- which Rovelli pegs around 1370 in the S&P -- he recommends large-cap techs.
"Companies with a certain niche like RIMM, Apple or Google," Rovelli said, "that are outperforming everybody -- delivering products people really want," Rovelli said.
Global Showdown
Technology stocks were among the day's big gainers as traders cheered the next wave of cool gadgets. The tech-heavy Nasdaq outperformed both the Dow and the S&P 500.
American depositary shares of Research In Motion jumped 9.2 percent as the Canadian company's new BlackBerry received rave reviews. The device, known as the BlackBerry Bold, is the first 3G BlackBerry, which means global roaming, has features that make it easier to browse the Internet and download music, and has added processing power to better handle business applications.
The BlackBerry Bold is expected to debut this summer in Europe, when Apple's first 3G iPhone is set to launch. Apple shares gained 2.6 percent.
Shares of AT&T , which has exclusive U.S. carrier rights on the BlackBerry Bold, ticked up 1.4 percent.
EDS shares were halted after jumping 28 percent, pending news that Hewlett-Packard is close to buying the outsourcing tech-services firm for $12 billion to $13 billion. H-P confirmed the talks but said it's not a done deal.
H-P shares were halted after dropping 5.1 percent but didn't drag on the Dow amid broad-based blue-chip gains.
The play for EDS was said to be an attempt to give H-P a competitive edge with tech-services giant IBM , but shares of Big Blue gained 1 percent after the annoucement.
Sprint Nextel reported a wider quarterly loss as it lost high-value customers who pay monthly phone bills and commit to contracts of at least a year. The No. 3 U.S. mobile-service posted a loss of $505 million, or 18 cents a share, compared with a loss of $211 million, or 7 cents a share, a year earlier. Wall Street was expecting Sprint to turn a small profit of 2 cents per share. Shares fell 1.5 percent.
The financial sector gained 1.5 percent, as results from HSBC, Europe's biggest bank, eased concerns about the banking sector. HSBC reported its profit rose as growth in Asia and elsewhere helped counter another big hit for bad debts on U.S. home loans. The company took a bad debt charge of $3.2 billion during the quarter for its U.S. consumer finance business and wrote down almost as much for a deterioration in the value of risky assets amid the credit crunch.
Hard-hit bond insurer MBIA reported a stunning quarterly loss of $2.41 billion, or $13.03 a share, well above the 19 cents a share analysts had expected. The company attributed its poor performance to unrealized losses on insured derivatives.
MBIA shares bounced up 4.5 percent in what traders said was most likely short-covering. The same thing happened to Fannie Mae , though the proof was in the next day's pudding, when the stock resumed its decline.
Traders may also have been cheered by comments from MBIA's CEO, who said the company's balance sheet is set up to withstand credit stress levels many multiples of what we are experiencing now. The insurer also said quarterly revenue dropped less than it had initially reported.
Shares of rival Ambac fell 1.1 percent.
AIG dropped 4.7 percent after former CEO Maurice "Hank" Greenberg said the company is in "crisis" and called on the insurer to postpone its annual meeting, scheduled to take place later this week.
Securities and Exchange Commission on Monday.Morgan Stanley rose 3.7 percent after the company said it has raised a $4 billion infrastructure fund, exceeding its target, and is targeting investments in sectors like transportation, energy and utilities. The fund shot past its original target of $2.5 billion.
Traders congratulated Cablevision for its deal to acquire Newsday by sending the shares down 1.8 percent. Cablevision agreed to buy the Long Island newspaper from Tribune for $650 million; News Corp. CEO Rupert Murdoch had also been in the running for the paper, but withdrew his bid on Saturday. The deal brings Newsday back to local ownership on Long Island. Tribune started to look for a buyer to lighten its $8.2 billion debt load after it went private last year. Tribune, based in Chicago, will retain a 3 percent stake in the venture.
Clear Channel shares jumped 9.6 percent following news that a settlement has been reached in the dispute over funding of a $20 billion buyout of the firm. The banks funding the buyout had been trying to pull out of the deal and were being sued by private equity firms. Under terms of the settlement, the banks will fund the takeover at $36 a share, the Wall Street Journal reported. A trial had been scheduled for today but was postponed until Tuesday, presumbably pending the settlement.
Package-delivery giant Federal Express . FedEx, which is widely seen as a gauge of the economy, slashed its earnings forecast, citing higher energy prices and a drop in demand.
Cha-Ching! for AnnTaylor Stock
AnnTaylor shares shot up 16 percent after the retailer raised its first-quarter earnings forecast, citing pared inventories and an improvement at its Loft stores. Still, the women's clothing chain was cautious about the rest of the year, leaving its full-year oulook unchanged.
A slew of other retailers -- including Wal-Mart , Macy's and JCPenney and -- report earnings this week and investors will be watching to see how well they're weathering the storm.
"Everyplace you go, everything's on sale," said Tom Schrader, managing director for U.S. equity trading at Stifel Nicolaus, adding that he projects a lower-than-expected core CPI reading from the government on Wednesday. "Stores can't pass on rising costs ... because people don't have the money," he said.
Wal-Mart shares rose 1.5 percent to $58.02 after Citigroup raised its price target on the stock to $67 from $57, citing expectations of strong growth from international operations, as international sales have increasingly become a driver of growth for the world's largest retailer.
Macy's gained 3.3 percent and Penney added 3.1 percent.
In the only economic news of the day, the U.S. government logged a $159.3-billion surplus for April, helped by tax filings, but that was lower than the $177.7 billion recorded a year earlier.
This Week:
TUESDAY: Import prices; retail sales; business inventories; Earnings from Wal-Mart, TJ Maxx, Electronic Arts and Whole Foods; Bernanke, other Fed officials speaks; Virginia primary
WEDNESDAY: CPI; mortgage applications; crude inventories; Earnings from Freddie Mac, Deere, Macy's and Sony; Fed's Yellen speaks
THURSDAY: Jobless claims; Philly and NY Fed surveys; industrial production; Earnings from Blockbuster, JCPenney, H-P and Kohl's
FRIDAY: Housing starts; consumer sentiment
Send comments to cindy.perman@nbcuni.com.