The positive momentum that pushed Wall Street to its best week of the year propelled stocks higher again on Monday.
The S&P 500 was up 1.4%, the Dow Jones Industrial Average climbed 1.4%, and the Nasdaq added 1.5%. The S&P 500 and Dow moved out of correction territory, now down less than 10% from their 52-week highs.
Stocks are still on shaky ground, though, with many analysts pointing to a pervasive undercurrent of pessimism on Wall Street that keeps the outlook blurry.
"Many investors remain skeptical about the sustainability of last week's rally since it came without much of a fundamental shift in the negative feedback-loop narrative that has driven financial markets for much of this year," said Bob Doll, chief equity strategist at Nuveen Asset Management. "There is still considerable uncertainty about the near-term, especially since investor sentiment is so depressed and out of line with economic fundamentals."
The outlook for earnings needs to improve before equities can climb with more certainty, argue some analysts.
"The problem for investors is that the basic fundamentals have not changed much," said Russ Koesterich, BlackRock's global chief investment strategist. "Even if the global economy manages to skirt an economic recession, it is clear we're in the midst of a deepening profits recession."
The fourth-quarter earnings season is reaching its end with only 10% of S&P 500 companies remaining. So far, 68% of those reporting have exceeded analysts' estimates. Average earnings are down 3.8% from a year earlier, with the energy sector proving the biggest drag.
Crude oil drove markets higher on Monday, largely due to more support from a number of countries for an output cap to stabilize commodities trading. Negotiations over a preliminary deal should conclude by March 1, according to Russia's energy minister, Alexander Novak. Russia and members of the Organization of Petroleum Exporting Countries led by Saudi Arabia negotiated a deal last week.
West Texas Intermediate crude oil also got a boost when the International Energy Agency said it expects U.S. shale oil production to fall by 600,000 barrels per day over 2016. WTI crude added 6.2% to $31.48 a barrel. Oil prices recently fell to 13-year lows on record production levels, a global supply glut, and signs of weaker demand. Prices are down nearly 20% for the year.
The energy sector was one of the best performers on Monday. Major oilers Chevron (CVX) , BP (BP) , Schlumberger (SLB) , Royal Dutch Shell (RDS.A) , Phillips 66 (PSX) and PetroChina (PTR) were higher, while the Energy Select Sector SPDR ETF (XLE) climbed 2.6%.
In company news Monday, United Technologies (UTX) spiked on reports Honeywell (HON) had met with the aerospace company regarding a potential deal. Any acquisition would be made largely in stock, sources told CNBC. Honeywell fell nearly 2%, wiping out earlier gains.
Weight Watchers (WTW) shares pulled back from Friday's rally on news a favorable academic study had been funded by the company. The study released on Friday suggested adults with prediabetes benefited from weight-loss programs such as Weight Watchers. Shares had spiked nearly 20% on the release.
Lumber Liquidators (LL) slumped nearly 20% after the Centers for Disease Control and Prevention backtracked on its own findings and warned of a far higher risk of cancer from some of the company's laminate flooring than originally believed. A miscalculation had created results on testing of the product that were three times lower than they should have been. The CDC estimated the risk of tumors as six to 30 cases for every 100,000 people exposed to the flooring.
Dean Foods (DF) fell 7.8% despite better-than-expected quarterly guidance. The company expects adjusted earnings of 32 cents to 42 cents a share in its first quarter as milk costs decline further. Fourth-quarter earnings of 20 cents a share were more than triple a year earlier as milk costs dropped 31%.
Sysco (SYY) shares dropped 4.9% after the company agreed to buy U.K. food services distributor Brakes Group for roughly $3.1 billion (2.2 billion British pounds). The acquisition includes around $2.3 billion in Brakes' debt. The deal is expected to close before July 2016, the end of its fiscal year.
HSBC (HSBC) , Europe's biggest bank, said profit in 2015 fell 1.2% from a year earlier and warned of a "bumpier" global financial outlook because of China's slowing economy. HSBC also reported a fourth-quarter loss of $1.3 billion, a reversal from year-earlier profit of $511 million. Shares were down almost 2%.