Stocks closed modestly higher as oil and precious metals staged a strong comeback, sending prices in the energy and materials sectors higher.
The Dow Jones Industrial Average rose 45.94 points, or 0.4 percent, to close at 12,684.68, after a better-than-expected April jobs report helped stocks bounce back on Friday following four days of losses.
The S&P 500 rose 6.09 points, or 0.45 percent, to close at 1,346.29, while the Nasdaq rose 15.69 points, or 0.6 percent, to close at 2,843.25. The CBOE Volatility Index, widely considered the best gauge of fear in the market, sank to nearly 17.
Among key S&P 500 sectors, energy and materials gained, while financials fell.
News before the market opened that Standard & Poor's was downgrading Greece to near-junk status sent the dollar higher, and pressured stocks. But that sentiment reversed around mid-morning, and the dollar traded lower against a basket of currencies by afternoon.
Commodities strengthened because "geopolitical concerns are still very much in place," Cardillo said. "There’s no signs of the global economy weakening where we’d see demand slack off..and so I think the fact precious metals had gotten ahead of themselves, and wound up in more speculative hands, is basically what caused the reversal."
Gasoline futures also skyrocketed, rising more than 6 percent, as investors fear flooding could have an impact on supplies.
More than 90 percent of all energy stocks gained as oil recovered, including shares of Baker Hughes, which also benefited from an upgrade by Barclays to "overweight" from "equal weight." Diamond Offshore advanced after Duncan-Williams raised the firm to "buy."
Precious metals also bounced up, with silver gaining 5.2 percent on Monday to close at $37.11 an ounce, while gold closed up about 0.8 percent to 1 percent.
Citigroup slumped after the financial giant began trading at around $45 a share after a 1-for-10 reverse split. Citi shares traded at about $4.50 Friday.
Meanwhile, shares of AIG sank to the lowest level in nearly eight months as the government prepares to sell more shares of the bailed-out insurer to the public. At current levels, the government may not break even on the sale, as the U.S. Treasury would need to make as much as $28.72 a share.
Mosaic gained after news the fertilizer company would launch a $7 billion stock offering into the secondary market, CNBC reported.
On the M&A front, Hertz Global Holdings delcined after news the car rental company was making another attempt to buy Dollar Thrifty for $2.1 billion. Avis Budget was having difficulty getting regulatory clearance for a rival bid. Last week, Dollar Thrifty solidly beat earnings results and raised its profit outlook.
Tenet Healthcare, which operates hospitals, traded flat to slightly higher after news its board rejected a sweetened $4.1 billion bid from Community Health Systems. Tenet's board said the hostile bid undervalues the company.
Sysco, however, jumped to a new 52-week high after the top food distributor reported results that easily beat expectations, as demand for its products rose even as it increased prices.
In initial public offering news, LinkedIn, the social networking site for business professionals, plans to sell abut 4.8 million shares for $32 to $35, raising up to $274.4 million.
On the economic front, Goldman Sachs and Morgan Stanley lowered their forecasts for U.S economic growth this year. Goldman, which dropped its GDP forecast to 3-to-3.5 percent from 3.5-to-4 percent, cited signs of slowing momentum in economic growth, rising gasoline prices, and fiscal tightening for cutting its forecast.
Morgan Stanley cut its forecast to a 3.3 percent gain in 2011, down from its April forecast for a 3.6 percent gain, saying its original forecast accounted for the payroll tax cut granted late last year, and that since, rising gasoline prices from about $3 a gallon to $4 a gallon, have wiped out any positive gains from the tax cut.
While the economy has showed signs of weakness lately, a surprisingly strong jobs report from the government last week shows it does continue to expand, albeit unevenly.
"I think if oil prices stay below $100, that should lead to some relief to consumers at the gas pump, and that along with continued job growth, will probably be enough to sustain the economic recovery, said Michael Sheldon, chief market strategist at RDM Financial Group.
European shares closed lower, led by bank stocks, after Standard & Poor's lowered Greece's credit rating further into junk territory on growing fears that Athens may need to restructure its debt.