U.S. stocks edged higher on Monday as takeover news and gains in bank shares on hopes of a regulatory reprieve were offset by uncertainty over the Federal Reserve's policy intentions.

Until Fed Chairman Ben Bernanke clarifies the Fed's thinking behind last week's surprise hike in the discount rate, investors were set to tread carefully as they weigh the likely removal of the extraordinary liquidity that has propped markets up for months, analysts said.

Following last week's surprise rate hike, Bernanke is scheduled to testify on monetary policy and the economy before House and Senate committees on Wednesday and Thursday.

A lot of the focus is probably going to be on exit strategies; therefore, it's going to be a relatively hawkish testimony as far as Wall Street is concerned, said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore.

The S&P energy index <.GSPE> dropped nearly 1 percent, while shares of Chevron Corp shed 1.2 percent to $73.16.

But among banks, JPMorgan Chase rose 2.7 percent to $41.10 as the KBW Bank index <.KBW> shot up 2.3 percent. The S&P financial index <.GSPF> rose 1.6 percent.

The Dow Jones industrial average <.DJI> gained 15.12 points, or 0.15 percent, to 10,417.47. The Standard & Poor's 500 Index <.SPX> advanced 2.46 points, or 0.22 percent, to 1,111.63. The Nasdaq Composite Index <.IXIC> rose 4.24 points, or 0.19 percent, to 2,248.11.

Energy shares weighed on the S&P 500, but their impact was mitigated by a jump in banks as investors bet that the White House's bid on Monday to resuscitate the stalled healthcare overhaul would take some of the intense regulatory scrutiny off the banks.

The Democrats are going to spend so much political capital trying to get healthcare through that they might not necessarily have that capital to get any major financial reform through, Lutz added.

Slow trading volume also made investors reluctant to push stocks higher, but a spurt of takeover news involving energy and the pharmaceutical sectors pointed to optimism about share valuations.

Shares of oilfield services company Schlumberger Ltd slid after it agreed to buy Smith International Inc for $11.34 billion in stock, a deal with a significant premium, according to Schlumberger's own chief executive.

Schlumberger shares fell 3.6 percent to $61.60 and led decliners in the S&P energy index, but Smith International rose 8.9 percent to $41.06.

Millipore Corp shares jumped almost 21 percent to $86.01 after getting an unsolicited bid from Thermo Fisher Scientific Inc of about $6 billion. Thermo Fisher fell 3.2 percent to $47.67.

The Morgan Stanley healthcare payor index <.HMO> rose 1.6 percent after President Barack Obama proposed a revised overhaul of U.S. healthcare.

The lack of a public plan in the president's proposal was a relief for (healthcare) investors, said John Sullivan, healthcare investment strategist at Leerink Swann in Boston.

WellPoint Inc rose 1.9 percent to $59.59. The HMO index closed on Friday at a more than two-month low.

(Additional reporting by Rodrigo Campos; Editing by Jan Paschal)