U.S. stocks rose on Monday as traders predict the Federal Reserve will further cut its benchmark lending rate by 0.5 percent later this week, which is set to boost the economy.

Stocks fell across Europe and Asia, led by a 7.2 percent drop in China's benchmark index and leading US stocks to open in the red. The Standard & Poor's 500 index recovered from earlier losses which were caused by slower sales growth at McDonald's Corp. and a dip in new homes sales.

The Nasdaq Composite Index rose 9.53 or 0.4 percent, to 2,335.73 at 11:24 a.m. in New York. The Dow Jones Industrial Average increased 57.80, or 0.5 percent, to 12,264.97. The Standard & Poor's 500 index rose 9.46 or 0.71 percent to 1,340.07.

The Commerce Department reported sales of new homes in December dropped by 4.7 percent, and that 2007 new home sales fell a record of 26.4 percent compared to 2006. The disappointing results increased investors' concerns that further write-downs by big banks for subprime loan losses will still occur. The housing data raised investor's predictions that the Federal Reserve might cut rates again to boost the weakening U.S. economy.

McDonald's, the worlds largest fast food seller said its quarterly profit rose 3 percent but December U.S. sales were flat with a year ago due to slowing consumer spending.

McDonald's shares fell $3.30, or 6.1 percent, to $50.80.

The central bank cut its benchmark federal-funds rate 0.75 percent last week on following a global equity slow down. The Fed announcement will be made after its Jan. 29-30 meeting.