Stocks rebounded on Monday from Friday's selloff, which was triggered by signals from the Federal Reserve that it could boost interest rates and begin tapering asset purchases sooner than expected.
The Dow Jones Industrial Average finished up 586 points, or 1.76%, to 33,876, the S&P 500 gained 1.4% and the Nasdaq was up 0.79%.
The S&P 500 on Friday finished its worst week since February after St. Louis Federal Reserve Bank President James Bullard said the central bank had started talks on trimming the pace of its $120 billion in monthly bond purchases. He also predicted the first rate increase may come as soon as 2022, earlier than the Federal Reserve's forecast.
Bullard's comments followed those made from the central bank last week that it could raise rates twice in 2023 and that it expected inflation to rise 3.4% this year, considerably more than previous forecasts.
Markets were caught off guard by the Fed's hawkish pivot since it had been assuring investors that any inflation spikes would be temporary.
The Fed's hawkish turn took its toll on value stocks last week, with investors worrying that if the Fed was to play catch-up on rates and move too quickly to normalize, it would slow near and medium-term growth prospects.
The CBOE's benchmark volatility gauge, the VIX, was trading just under 18 points but near the highest levels in a month, a move that also indicates a great deal of uncertainty as Wall Street begins a new week.
"The Fed’s inflation forecast definitely gave traders some food for thought, as the markets got a taste of the rotation away from pandemic-driven monetary policy," said Chris Larkin, managing director of trading at E-Trade.
Investors on Tuesday will be monitoring closely an appearance before Congress by Fed Chairman Jerome Powell.
The yield on the benchmark 10-year Treasury note edged up Monday to 1.478%.
Bitcoin prices dropped Monday as China intensified its crackdown on cryptocurrencies.
Bitcoin was down 8% to $32,640, and Ethereum, the second-biggest digital currency, declined more than 12.2%.
The Chinese city of Ya’an was said to have begun a sweeping clampdown on crypto mining firms, Bloomberg reported.
Amazon brought its seventh annual, two-day shopping event forward this year with hopes of sparking a spending boost amid a traditionally quiet June.
The Seattle online-retail and tech giant faces intense competition from rivals such as Target (TGT) - Get Report and Walmart (WMT) - Get Report for a slice of the $10 billion in gross merchandise volumes it booked last year.
Analysts at Telsey Advisory Group forecast this year’s Prime Day would generate between $11 billion and $12 billion in sales, with $8 billion to $8.5 billion coming from shoppers in the U.S.