U.S. stocks rallied and closed on a sharply higher note after Federal Reserve Chairman Ben Bernanke indicated that a supportive monetary policy is still needed to boost jobs growth.
S&P 500 Index gained 1.39 percent to end at 1,416.51. The Dow Jones Industrial Average advanced 1.23 percent to finish at 13,241.63. The Nasdaq Composite Index closed at 3,122.57, up 1.78 percent.
"We have seen some positive signs on the jobs front recently, including a pickup in monthly payroll gains and a notable decline in the unemployment rate," Bernanke told a gathering of the National Association for Business Economics. However, he cautioned that the job market remains far from normal despite the recent improvement.
"Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies," Bernanke said.
On the housing front, a report showed that contracts to buy previously owned homes unexpectedly dropped in February, yet another evidence that the housing market is taking time to stabilize. Pending home sales - considered a key indicator because they track contract signings - dipped 0.5 percent to 96.5 after a 2 percent gain in the previous month, a report from the National Association of Realtors showed. Economists expected a 1 percent gain. The latest housing data follows a drop in existing home-sales, new-home sales and housing starts reported last week.
On Friday, U.S. stocks closed on a positive note, paring earlier losses, as a gain in energy shares helped offset a disappointing housing data. Energy stocks advanced as oil prices rose following media reports that Iran's oil exports were expected drop sharply due to Western sanctions.
Hot Stocks Of The Day: (YHOO, LGF, BWLD, CALM, ARNA)
In corporate news, Yahoo! Inc. (NASDAQ:YHOO) advanced 1.01 percent to close at $15.54. On Sunday, YHOO named three new independent directors to its board, ahead of a proxy battle with its largest shareholder Third Point LLC. The hedge fund, which controls around 5.15 percent of Yahoo, has nominated four for board positions, but the struggling Internet company has only agreed on one of those nominees. Third Point said "intends to move forward with a proxy contest." Third Point said it offered several significant compromises to strike a deal to avoid a proxy contest.
Lions Gate Entertainment Corp. (NYSE:LGF) jumped 4.47 percent to close at $15.18.