Stocks rose on Monday on strong earnings and signs of a strengthening economy, even as a surge in the price of oil highlighted the potential for increased political risk in the Middle East to upset markets.
Egyptian Vice President Omar Suleiman said on Monday that President Hosni Mubarak has asked him to start a dialogue with all political forces, while Egypt's armed forces pledged not to fire on peaceful demonstrators.
The latest news calmed markets after stocks suffered their biggest fall in nearly six months on Friday. The improved sentiment helped the Market Vectors Egypt Index ETF rise 7.9 percent, indicating investors' appetite for risk in the region had recovered somewhat.
It's creating a great opportunity to step up and increase exposure to emerging markets and other areas of the international markets, said Robert Lutts, president and chief investment officer at Cabot Money Management in Salem, Massachusetts. I'm optimistic that this will be resolved and blow over.
Relief that the turmoil appeared not to be escalating allowed investors to focus on data showing stronger U.S. personal spending and regional manufacturing, while better-than-expected earnings from Exxon Mobil Corp sent the company's shares up more than 2 percent.
The Dow Jones industrial average <.DJI> gained 68.23 points, or 0.58 percent, to 11,891.93. The Standard & Poor's 500 Index <.SPX> rose 9.78 points, or 0.77 percent, to 1,286.12. The Nasdaq Composite Index <.IXIC> added 13.19 points, or 0.49 percent, to 2,700.08.
However, the rise in the price of NYMEX crude oil futures suggested ongoing concerns. Crude climbed over 3 percent to $92.19 per barrel on Monday on worries the unrest in Egypt could spread to oil-producing nations or disrupt the flow of oil through the Suez Canal. The S&P energy index <.GSPE> jumped 2.6 percent, marking the day's biggest sector gain.
The question is what country might be next, said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. The catalyst is inflation, jobs -- or the lack thereof -- and suppressive government.
The CBOE VIX Volatility index <.VIX>, known as Wall Street's fear gauge, dipped 2.5 percent to 19.55, after having surged by 24 percent on Friday in the largest single-day percentage gain since May.
On the economic front, the Commerce Department said U.S. consumer spending rose in December for a sixth straight month, while a separate report showed business activity in the U.S. Midwest grew more than expected in January.
The strengthening data lifted optimism ahead of Friday's closely watched monthly non-farm payrolls report, expected to show the U.S. economy added 145,000 jobs in January.
M&A activity also helped lift stocks. Massey Energy Co rose 9.8 percent to $62.86 after Alpha Natural Resources agreed to a $7.1 billion deal to create the second largest U.S. coal miner by market value.
In other M&A action, CNOOC Ltd <0883.HK> will pay $1.3 billion in its second shale deal with America's Chesapeake Energy Corp , the latest move by China's top offshore oil producer in its aggressive drive for overseas acquisitions.
Chesapeake advanced 8 percent to $29.53.
Exxon Mobil Corp gained 2.1 percent to $80.68 after the world's largest publicly traded oil company reported a 53 percent increase in quarterly profit. Its shares closed up at $80.68 after earlier in the day hitting a two-year high of $80.82.
Technology bellwether Intel Corp closed flat at $21.07 after cutting its first-quarter revenue forecast by $300 million due to costs for correcting a design flaw in one of its chips.
Trading volume was 7.7 billion shares on the New York Stock Exchange, the American Stock Exchange and Nasdaq, down from last year's estimated daily average of 8.47 billion shares.
Trading volume on Friday when stocks skidded on fears over Egypt had hit the highest of the year.
Advancing stocks outnumbered declining ones on the NYSE by about 5 to 2 on Monday. On the Nasdaq, advancers beat decliners by around 3 to 2.
(Reporting by Edward Krudy; Additional reporting by Alina Selyukh; Editing by Leslie Adler)