After a market nosedive on Friday, investors bought safe investments like household goods makers and phone companies. Technology companies also jumped.
Stocks started the day lower following Friday's drop, but they soon rallied.
Investors were pleased when Lael Brainard, a member of the Federal Reserve board, said the Fed should not raise interest rates quickly because that could hurt the economy. The biggest gains went to safe investments that pay big dividends, as they are more enticing to investors when interest rates and bond yields are low.
Stocks had plunged on Friday following remarks from another Fed official that suggested interest rates could go up next week.
David Kelly, chief global strategist for JPMorgan Funds, said he thinks Federal Reserve policymakers seem "noncommittal" and aren't sure if they should raise interest rates now or not. In his opinion, the Fed's cautious attitude toward raising interest rates even a little is causing strong market reactions.
"The more cautious they are, the more sensitive the market becomes," he said.
"What's one quarter of 1%? It's nothing."
The Dow Jones industrial average jumped 239.62 points, or 1.3%, to 18,325.07. The Standard & Poor's 500 index rose 31.23 points, or 1.5%, to 2,159.04. The Nasdaq composite surged 85.98 points, or 1.7%, to 5,211.89.
The gains in the main three U.S. indexes made up for more than half of Friday's losses.
As investors sought safe-play picks, retail giant Wal-Mart rose 1.64 dollars, or 2.3%, to 71.94 dollars and Procter & Gamble gained 2.01 dollars, or 2.3%, to 88.25 dollars. Phone companies also rose and AT&T gained one dollar, or 2.5%, to 40.71 dollars. Those stocks took some of the biggest losses on Friday.
HP agreed to buy Samsung's printer business for 1.05 billion dollars, and HP stock rose 54 cents, or 3.9%, to 14.49 dollars. That helped take technology stocks higher. Elsewhere, Apple rose 2.31 dollars, or 2.2%, to 105.44 dollars and communications chip maker Broadcom picked up 3.70 dollars, or 2.3%, to 164.48 dollars.
Canadian companies Agrium and Potash Corp. of Saskatchewan agreed to combine into the world's largest crop nutrient company. The companies value their combined business at 36 billion dollars, and Potash shareholders will own a majority of stock in the new company. Potash stock lost 21 cents, or 1.2%, to 16.76 dollars and Agrium dipped 2.57 dollars, or 2.7%, to 92.64 dollars.
Markets overseas took sharp losses following the rout in the U.S. Friday. Germany's Dax fell 1.3% while the CAC-40 in France also lost 1.2%. The FTSE 100 index of leading British shares gave up 1.1%. Japan's benchmark Nikkei 225 index lost 1.7% and South Korea's Kospi slid 2.3%. In Hong Kong the Hang Seng shed 3.4%.
US stocks had plunged late last week after Federal Reserve Bank of Boston President Eric Rosengren said there was a case to be made the US central bank should raise rates sooner rather than later. Mr Rosengren and Mr Brainard have both been reluctant to raise rates too quickly.
Investors are not sure if the central bank will raise interest rates, and they're not sure the economy is healthy enough to handle that. Higher rates threaten stocks by making interest-paying savings accounts and bonds more attractive to investors. They could also ding corporate earnings by raising companies' borrowing costs.
Irish drugmaker Perrigo added 6.52 dollars, or 7.3%, to 95.23 dollars after activist investment firm Starboard Value bought a 4.6% stake in the company. Starboard Value said Perrigo needs to boost profit margins for some of divisions, and notes that the company's stock has not done well since Perrigo rejected an offer from competitor Mylan NV. Perrigo said it will review Starboard's comments.
US crude rose 41 cents to 46.29 dollars a barrel in New York. Brent crude, the benchmark for international oil trading, climbed 31 cents to 48.32 dollars a barrel in London.
Energy Transfer Pipeline fell 1.19 dollars, or 3%, to 37.95 dollars. On Friday a federal judge ruled that the company can build a 3.8 billion dollar pipeline intended to carry oil from North Dakota to Illinois. That sent the company's stock higher. But the federal government stepped in to temporarily stop part of the project, and several agencies said they will reconsider their decisions supporting it.
The Standing Rock Sioux tribe wants to stop construction of part of the pipeline because it crosses sacred sites and approaches a lake that provides drinking water for a reservation in southern North Dakota.
In other energy trading, wholesale petrol gained three cents to 1.39 dollars a gallon. Heating oil added one cent to 1.44 dollars a gallon. Natural gas jumped 12 cents, or 4.2%, to 2.92 dollars per 1,000 cubic feet.
Gold fell 8.90 dollars to 1,325.60 dollars an ounce. Silver lost 37 cents, or 1.9%, to 19 dollars an ounce. Copper gained one cent to 2.10 dollars a pound.
Bond prices rose. The yield on the 10-year Treasury note fell to 1.67% from 1.68%. The dollar fell to 101.84 yen from 102.69 yen late Friday. The euro rose to 1.1241 from 1.1228 dollars.