Updated from 4:04 p.m. EDT

Stocks rebounded from a two-day slump Monday as a cease-fire took hold in Iraq and investors went shopping ahead of what's expected to be another strong earnings period. Oil stocks led the charge after an international agency forecast record demand for gasoline this year.

The Dow Jones Industrial Average closed up 73.53 points, or 0.7%, to 10,515.56; the S&P 500 gained 5.90 points, or 0.52%, to 1145.22; and the Nasdaq Composite was up 12.60 points, or 0.61%, to 2065.48. The 10-year Treasury note fell 10/32, with the yield up to 4.23%, a three-month high, while the dollar was higher against the yen but lower against the euro.

Volume on the New York Stock Exchange was just over 1.1 billion shares, with advancers and decliners about even. Almost 1.5 billion shares changed hands on the Nasdaq, where advancers outnumbered decliners by about 5 to 4.

"Part of today's strength is a bounce-back from last week's losses," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "People took profits ahead of the weekend, fearing that something bad might happen in Iraq over the weekend, which wasn't really the case."

Sheldon said that earnings season should be a success, but there are several dark clouds on the horizon. "The biggest risk over the next few days is probably a rise in interest rates," he said, pointing out that bond yields are rising, and that a reading on the government's main gauge on inflation, the consumer price index, is due out on Wednesday. "All of these factors could lead to higher rates, which could definitely put a damper on a positive earnings season in the markets."

The downtick in bonds followed a report Sunday in the San Francisco Chronicle in which Federal Reserve President Robert Parry was quoted as saying that the fed funds rate probably would rise to 3.5% if inflation were to average 1% to 2%. Parry also estimated inflation will run about 1.5% for the rest of 2004, the newspaper reported.

Another concern in the spotlight on Monday was rising energy prices. Crude oil futures closed just shy of their recent 13 1/2 year-high, rising 1.9% to $37.83 a barrel, propelled by strong global demand and worries about oil industry security in the Middle East. Also, May gasoline futures in New York hit a new high of $1.1830 a gallon on Monday, as record prices did not deter U.S. drivers from filling their tanks.

While high energy prices don't bode well for the economy, they provided a boost to stocks in the sector. Oil refining shares rose after the International Energy Agency predicted daily gasoline use would be 80.3 million barrels in 2004, its biggest increase in seven years. ExxonMobil ( XOM) was up 1.5%, ConocoPhillips ( COP) was up 1.7%, Valero ( VLO) was up 4.2%, and KCS Energy ( KCS) was up 3.7% on the surge.

In geopolitics, truce talks continued Monday in Fallujah, Iraq, where aid workers say more than 600 Iraqis have been killed in fighting over the past week. While the guns were largely silent, a radical Shiite cleric pulled his militiamen out of police stations and government facilities, partially meeting a U.S. demand for ending the standoff in southern Iraq. Elsewhere, violence continued and the situation over kidnapped international workers and civilians continued to see some progress and setbacks. More than 60 American soldiers have been killed in Iraq since April 4, and numerous civilians have been taken hostage.

Officials continued to await word on the fate of American hostage Thomas Hamill, a contractor whom insurgents had threatened to kill unless the Marines withdrew from Fallujah by early Sunday.

In corporate news, Entergy ( ETR) said first-quarter earnings will trail guidance due to lower earnings at its Entergy-Koch joint venture. Its shares lost $1.30, or 2.2%, to $56.98. Microsoft ( MSFT) agreed to pay $440 million to settle a patent dispute with media-privacy company InterTrust. Its shares closed up 13 cents, or 0.5%, to $25.61.

DuPont ( DD) rose 63 cents, or 1.4%, to $44.06 after announcing plans to cut 3,500 jobs, or 6% of its workforce, as part of a restructuring plan.

Shares of Walt Disney ( DIS) closed down 55 cents, or 2.1%, to $25.70 after Banc of America analyst Douglas Shapiro said Comcast ( CMCSA) may end its bid for the media giant.

Gannett ( GCI) said first-quarter profits were in line with expectations, boosted by a stronger advertising market than a year earlier, when results were hurt by the war in Iraq. The nation's largest newspaper publisher earned $274.4 million, or $1 a share, up from $249.8 million, or 93 cents a share, in the same quarter last year. Its shares closed down $1.20, or 1.3%, to $89.22.

Lower first-quarter profits still beat expectations at The New York Times ( NYT), as higher costs and expenses weighed on the media conglomerate. It earned $58.4 million, or 38 cents a share, down from last year's $68.8 million, or 45 cents a share. Analysts were expecting profits of 36 cents a share, according to Thomson One Analytics. Its shares lost 34 cents, or 0.7%, to $46.73.

On Tuesday, the first-quarter earnings season picks up with a long list of results scheduled for release before the opening bell. Among the notables, Johnson & Johnson ( JNJ) is expected to report earnings of 80 cents a share, up from last year's 68 cents a share; BB&T ( BBT) is expected to report profits of 63 cents, down from last year's 70 cents a share; Merrill Lynch ( MER) is expected to have earned $1.06 a share, up from last year's 72 cents a share; and Pepsi Bottling is expected to report a profit of 17 cents a share, up from last year's 14 cents a share.

The Census Bureau releases changes in business inventories for February and retail sales data for March at 8:30 a.m. EDT. According to consensus estimates, inventories rose 0.3% for the month, after a 0.1% rise in January, and retail sales increased 0.7%, matching February's gain. Excluding autos, retail sales are expected to have increased 0.6%, compared with 1.2% in February.

At 2 p.m., the Treasury Department releases the federal budget statement for March. Economists are forecasting a $70 billion deficit, up from the $58.89 billion shortfall in February.