Updated from 4:06 p.m. EDT

Stocks continued their recent advance Monday, as snippets of upbeat corporate news outweighed concerns about the falling dollar.

The Dow Jones Industrial Average closed up 122 points, or 1.4%, at 8726 -- a level not seen in four months -- while the Nasdaq rose 21 points, or 1.4%, to an 11-month high of 1541. The S&P 500 finished up 13 points, or 1.4%, at 933.

"Feels like Pamplona," said Bryan Piskorowski, equity analyst at Prudential Securities. "The glass remains half-full on Wall Street."

Volume on the Big Board reached 1.37 billion shares, with advances beating decliners by 2 to 1. On the Nasdaq, volume hit 1.77 billion, with winners outpacing losers by 2 to 1.

Paul Nolte, director of investments at Hinsdale Associates, said that while the bulls have dominated trading recently, he still expects a correction "over the coming three to six weeks that could retrace about half of the 15% gained from the March lows."

Nolte said if the weakness in the dollar persists, the equity market will eventually take notice. He also added that "for all the hoopla over the past quarterly earnings, valuations remains a far cry from "normal" -- leaving what remains of the 'bull in a bear' run a thick ceiling to get through."

The dollar was down to its lowest level in four years against the euro following comments by U.S. Treasury Secretary John Snow over the weekend that a weak dollar would be favorable to U.S. exporters. It also was lower against the yen. Analysts worry that a decline in the dollar will prompt overseas investors to take money out of dollar-denominated assets because a weak dollar reduces the value of U.S. stocks and bonds to foreigners.

Still, Salomon Smith Barney analyst Tobias Levkovich said the fall in the dollar "has some clear benefits despite broad concerns." Specifically, a lower dollar can help boost exports and lift earnings. Levkovich noted that technology, energy and materials companies are the most exposed to the dollar. A weaker dollar can also raise import prices, he said, which may be helpful given recent concerns about possible deflationary pressures.

While equity investors seem to be looking on the bright side, the bond market continues to suggest that the economy remains weak. Treasuries were higher Monday, as hopes grew for another interest rate cut following last week's Fed meeting. The yield on the 10-year note fell to a two-month low of 3.7%.

An upgrade of Cisco Systems ( CSCO) and positive comments on Dow component Altria ( MO) in Barron's over the weekend helped lift the market, however.

Cisco was upgraded to overweight from equal weight by Lehman Brothers, which said the company had a good April and is probably having a good May. The shares were up 4% at $16.67.

On the Dow, Altria Group ( MO), owner of cigarette maker Phillip Morris, was higher after an analyst at Morgan Stanley told Barron's that the stock is undervalued. The brokerage thinks Altria's shares could reach $48 in the next 12 months, with concerns about the company's litigation problems diminishing. Altria shares were up 4.4% at $33.10.

SBC Communications ( SBC) jumped 4% at $24.64 after Illinois passed legislation that will allow the carrier to raise the fees rivals must pay to offer competing local service on its network.

In the retail group, Ann Taylor ( ANN) was higher after Prudential Securities upgraded the stock based on valuation. The firm set a price target of $28, or about $5 north of its current level. Prudential analysts lowered their rating for Gap ( GPS), citing the stock's recent run-up. Ann Taylor shares were up 7% at $24.92, while Gap shares were up 2% at $17.50.

Also on the retail front, investors will get results from Wal-Mart ( WMT) and J.C. Penney ( JCP) Tuesday, followed by April retail sales data on Wednesday. Wal-Mart said Monday that sales trends for May are so far on target. The company's shares were up 1.6% at $56.70, while J.C. Penney shares were up 4% at $17.89.

Investors also will gauge the health of the U.S. economy this week with the help of readings on prices at the consumer and producer levels, the Philadelphia Fed's manufacturing survey, housing starts and industrial production.

Among other stocks, AOL Time Warner ( AOL) is in talks with Germany's Bertelsmann to merge their music businesses, according to The Wall Street Journal. Shares of AOL were up 2% at $13.32.

Network Appliance's ( NTAP) estimates were raised at Goldman Sachs on a valuation basis and in light of the company's strengthening fundamentals. The maker of network-storage technology reports earnings Tuesday after the close. Shares were up 4% at $16.38.

Costco ( COST) gained 2% to $36.20 after Barron's argued the shares could rise to $45 in two years with higher sales at the largest U.S. chain of warehouse-club stores.

Siebel Systems ( SEBL) was lower after the Securities and Exchange Commission contacted the company over a possible Reg FD violation. The maker of marketing software said it has begun an internal inquiry into the matter. Shares were down 3.4% at $9.26.

Crude oil prices for June delivery fell 37 cents, or 1.3%, to $27.35 a barrel as some investors worried about falling demand.

Overseas markets were mixed, with London's FTSE 100 down 0.5% at 3987 and Germany's Xetra DAX down 0.6% at 2937. In Asia, Japan's Nikkei closed 0.9% higher at 8221, while Hong Kong's Hang Seng gained 0.8% to 9155.

Markets gained last week, with the Dow moving up 21 points to 8604. The S&P 500 rose 3 points to 933, while the Nasdaq gained 17 points to 1520.

If you liked this article you might like

Coming Week: Earnings Flood

Coming Week: Earnings Flood

Don't Write Off Inflation Threat

Don't Write Off Inflation Threat

No Quick Fix for Trade Gap

No Quick Fix for Trade Gap

Merrill's Doll Sees Stocks 'Muddling Through'

Merrill's Doll Sees Stocks 'Muddling Through'

Downhill From Profit Peak

Downhill From Profit Peak