U.S. stocks rose on Monday after American International Group Inc. said it overstated the value of some financial assets boosting fresh concerns over the financial sector.

AIG fell the most 21 years as auditors said they found errors in the insurer's accounting for credit-default swaps. Meanwhile, Yahoo! Inc. rose to a three-month high following its rejection of Microsoft Corp.'s $44.6 billion takeover bid as too low.

AIG, one of the 30 companies that make up the Dow Jones industrial average, said in a regulatory filing it would need to change the way it values its credit default swaps involving collateralized debt obligations. Credit default swaps are insurance policies against defaults, and CDOs are funds that contain slices of bonds, some of which are backed by mortgages.

The insurer said auditors found it had a material weakness in its internal control over financial reporting and oversight regarding how it valued certain credit default swaps. The unrealized, pre-tax charge will be $4.88 billion, in addition to whatever the swap portfolio's decline in valuation for December amounted to. Assuming a 35 percent tax rate, this amounts to at least $3.17 billion after taxes.

AIG dropped $5.78, or 11.41 percent, to $44.90.

The Standard & Poor's 500 Index added 3.77 points, or 0.3 percent, to 1,335.22 at 2:43 p.m. in New York after earlier falling as much as 0.8 percent. The Dow gained 14.23, or 0.1 percent, to 12,196.36, erasing a drop of as much as 113 points. The Nasdaq Composite Index increased 13.13, or 0.6 percent, to 2,318.18.