Rally Finds Second Act

Updated from 4:32 p.m. EST

Stocks rallied for the second time in three sessions Monday, as investors bet lower oil prices and a reviving employment picture will flush economic skeptics out of the market.

The Dow Jones Industrial Average closed with a gain of 116.66 points, or 1.14%, to 10,329.63; while the S&P 500 added 14.41 points, or 1.3%, to 1122.47. The Nasdaq was up 32.55 points, or 1.66%, to 1992.57, within striking distance of 2000, having fallen through the level three weeks ago. The Philadelphia Semiconductor Index gained 1.7%, reflecting the tech sector's lead.

Since the Dow fell 231 points over the two sessions ending a week ago Monday -- a dip that took it down 6.3% from a high touched in early February -- the average has now risen 265 points, or 2.6%. The Nasdaq, which was down 11.3% last Monday from late January high, has jumped 83 points, or 4.3%, in the last five sessions.

Dow components General Electric ( GE), Citigroup ( C) and Coca-Cola ( KO) all benefited from analyst upgrades, while Caterpillar ( CAT) jumped 2.7% after affirming first-quarter earnings. Only Alcoa ( AA), IBM ( IBM) and United Technologies ( UTX) were lower among the Dow 30.

Monday's action came on light volume, as traders shied away from major commitments ahead of Friday's jobs data. Almost 1.4 billion shares traded on the New York Stock Exchange, and about 1.7 billion shares changed hands on the Nasdaq. Advancers outpaced decliners on both markets by about 2 to 1.

In other markets, the 10-year Treasury note lost 14/32 to yield 3.88% after a sharp decline Friday, while the dollar was stronger against the euro and weaker against the yen.

Crude oil futures continued their recent slide, helping to trigger more gains in the airline sector. The Amex Airline Index rose 2.6%, and crude oil futures trading on the Nymex lost 28 cents to $35.45.

Paul Mendelsohn, chief investment strategist at Windham Financial, attributed some of today's gains to optimism that OPEC will decide not to follow through on previously agreed production cuts at a meeting on Wednesday and that the March employment report Friday will show a healthy increase in job creation, ending a string of disappointing reports.

"OPEC delaying their output cuts could certainly help the markets, and if expectations for job growth are finally achieved, that could be very positive," Mendelsohn said. "Statistically, you'd think we'd be due at this point for a positive report. At some point in time that report should be able to put out some positive numbers."

The consensus estimate is that the economy added 123,000 nonfarm payrolls in March and the unemployment rate remained at 5.6%.

"The biggest thing is the cautious optimism about Friday's jobs number," said Jay Suskind, head of institutional equity trading at Ryan Beck & Co. "Here we go again. The expectations are going to be that finally we're going to see some decent employment numbers, and I think the market is trying to get ahead of that and I think as we get closer you'll see the market just trade sideways here."

"The correction is behind us as long as Friday's number comes in OK," Suskind added. "If Friday's number disappoints again, then all bets are off."

"I'm still skeptical that this is the start of a big new rally, although I do acknowledge that that potential exists," said Richard Williams, equity strategist at Summit Analytic Partners. "I find it surprising that we would have a big rally before preannouncement season. From my channel-checking, I haven't found anything to be excited about."

Earlier in the day, stocks rose in Europe after the top executive of chipmaker STMicroelectronics ( STM) told a newspaper he expects demand to stay strong through next year. London's FTSE 100 closed up 1.1% to 4407, while Germany's Xetra DAX rose 1.5% to 3881. In Asia, Japan's Nikkei closed 0.5% lower at 11,718, while Hong Kong's Hang Seng fell 0.5% to 12,427.

Also buoying the U.S. tone were gains in General Electric ( GE) and Hewlett-Packard ( HPQ), both of which received sympathetic treatment in Barron's over the weekend. The magazine noted H-P's valuation discount to peers and suggested it might close if the computer maker continues to execute its integration. GE was said to have 15% of upside because investors could be underestimating its earnings power.

Hewlett-Packard closed up 74 cents, or 3.3%, to $23.10, while GE was rising 39 cents, or 1.3%, to $30.49.

On the deal front, Amgen ( AMGN) will pay $1.3 billion in stock to buy Tularik ( TLRK). The stock-swap deal values Tularik at $25 a share. Shares of Amgen closed up $1.47, or 2.5%, to $59.56, while shares of Tularik skyrocketed $7.54, or 44.3%, to $24.54.

Lyondell Chemical ( LYO) agreed to acquire Millennium Chemicals ( MCH) for stock worth about $1 billion, creating the country's third-largest independent publicly traded chemical company. Shares of Lyondell dropped 58 cents, or 3.7%, to $15.04, while Millenium shares jumped $2.55, or 20.3%, to $15.10.

In earnings news, Jos. A. Bank Clothiers ( JOSB) said quarterly earnings rose, beating Wall Street expectations, as renewed demand for suits helped to increase sales. It reported earnings of $9.6 million, or 85 cents a share, up from $6.4 million, or 59 cents a share, in the same quarter last year. Consensus estimates were forecasting earnings of 83 cents a share. Still, shares closed down $1.33, or 3.6%, to $35.89.

Before Tuesday's opening bell, Carmax Group ( KMX) is expected to report fourth-quarter earnings of 21 cents a share, up from last year's 18 cents a share. Then, at 10 a.m. EST, the Conference Board is expected to report that its consumer confidence index slid to 86 in March from February's reading of 87.3.

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