Stocks rose on Monday on strong earnings and signs of a strengthening economic recovery, although a surge in the price of oil highlighted the increased political risk in the Middle East.
After a weekend of digesting the political turmoil in Egypt, investors took a more sanguine view of events after sending stocks sharply lower on Friday. The Market Vectors Egypt Index ETF rose 6.3 percent.
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 as feared allowed investors to focus on data showing stronger U.S. personal spending and regional manufacturing as well as solid earnings from Exxon Mobil Corp, whose shares rose nearly 1.7 percent to $80.34.
NYMEX crude futures climbed 3 percent to $92.16 per barrel on concerns the unrest could spread to oil-producing nations or disrupt the flow of oil through the Suez Canal. The S&P energy index jumped 2.3 percent and was the biggest gaining sector.
The Dow Jones industrial average gained 23.65 points, or 0.20 percent, to 11,847.35. The Standard & Poor's 500 Index rose 5.90 points, or 0.46 percent, to 1,282.24. The Nasdaq Composite Index added 6.04 points, or 0.22 percent, to 2,692.93.
The CBOE Volatility index VIX, Wall Street's so-called fear gauge, dipped 1.95 percent to 19.65, after having surged by 24 percent on Friday in the largest percentage gain since May.
Wall Street posted its biggest one-day loss in nearly six months on Friday as the anti-government rioting in Egypt sparked a flight to less risky assets.
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 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 10 percent to $62.99 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 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 7.1 percent to $29.27.
Exxon Mobil Corp gained 1.8 percent to $80.41 after the world's largest publicly traded oil company reported a higher-than-expected 53 percent increase in quarterly profit.
Technology bellwether Intel Corp fell 1.8 percent to $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.
(Reporting by Edward Krudy; Additional reporting by Alina Selyukh; Editing by Kenneth Barry)