Oil's retreat helped soothe some of Wall Street's worries about inflation's impact on consumer spending. Crude briefly reached a new trading high of $126.40, but investors seemed shy to add to oil's huge gain of nearly $10 last week. Light, sweet crude oil fell $1.73 to settle at $124.23 per barrel on the New York Mercantile Exchange.

"This market does seem to be reacting positively to any sort of easing we see in the energy patch," said Craig Peckham, market strategist at Jefferies & Co.

Monday's gains showed investors are still willing to lay some bets, although some market watchers said Wall Street will still likely see stocks fluctuate as investors try to determine the economy's direction. Monday's advance follows a week in which the major indexes all fell as worries about the impact of inflation weighed on investors.

Peckham said some of the buying was a natural move higher after last week's decline, in which the Dow lost 2.4 percent and the S&P 500 declined 1.81 percent.

"This market, after having had a pretty rough last week, is prone to drawing in some more value-seekers," he said.

The Dow Jones industrial average rose 130.43, or 1.02 percent, to 12,876.31. The Standard & Poor's 500 index advanced 15.30, or 1.10 percent, to 1,403.58, and the Nasdaq composite index rose 42.97, or 1.76 percent, to 2,488.49.

Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume fell to 3.27 billion shares from 3.40 billion late Friday.

Bond prices dipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.80 percent from 3.78 percent late Friday. After an early strong start, the dollar ended mixed against most other major currencies, while gold prices fell.

The flow of first-quarter earnings reports is beginning to dwindle, so Wall Street will likely require some big news on the economy -- such as a sharp reversal in commodities prices -- to dislodge the markets from their current position, said Ted Oberhaus, director of equity trading at Lord, Abbett & Co.

"We're the majority of the way through the earnings season, and it has been relatively productive. With that as a backdrop, I would expect a range-driven appreciation over the next few months," Oberhaus said.

Investors will be looking to other readings on consumers this week to determine the toll rising energy costs might be having. Government figures are due on retail sales in April. And Wal-Mart, Macy's, JCPenney and Kohls are due to report first-quarter results.

Overseas, Japan's Nikkei stock average rose 0.64 percent. Britain's FTSE 100 rose 0.26 percent, Germany's DAX index rose 0.47 percent, and France's CAC-40 rose 0.32 percent.