The Dow Jones industrials rose as much as 158 points before losing momentum in the final hour of trading. Analysts said it was unclear whether reports of a trading error at the Chicago Mercantile Exchange was behind the drop or if investors opted to turn cautious after the large run-up.

"The rally began March 11 and we're now entering the fifth month. On top of that we had a 160-point move ­ so it was up, up and away. There might have ben an aspect of too much too soon," said Larry Wachtel, market analyst at Prudential Securities.

The Dow closed up 57.56, or 0.6 percent, at 9,177.15, having gained 0.5 percent last week.

The broader market also finished higher. The Nasdaq composite index gained 20.91, or 1.2 percent, to 1,754.84, following a weekly advance of 4.2 percent. The Standard & Poor's 500 index rose 5.72, or 0.6 percent, to 1,003.86, having gained 1.3 percent.

Dow component Citigroup advanced 97 cents to $47.12 after the nation's largest financial institution reported second-quarter earnings that beat estimates by 3 cents per share. The bank raised its quarterly dividend to 35 cents from 20 cents.

Bank of America rose 58 cents to $83.46 after it posted quarterly profits that also topped expectations.

Intel, another Dow component, gained 68 cents to $24.02 after Merrill Lynch raised the technology company's stock rating to "buy" from "neutral." The company releases its quarterly earnings report tomorrow.

"Citigroup and Bank of America tend to be a pretty good litmus test for the financial services sector as a whole. If they feel good, that's a good sign for the rest of economy," said Doug Sandler, chief equity strategist at Wachovia Securities.

"We continue to believe the potential for upside (earnings) surprises outweigh the downside surprises," he added. "Investors' risk tolerance is going up, and they're not penalizing equities as much as they're used to."

While stocks have surged in recent months, investors have been watching the second-quarter earnings season for evidence the economic recovery is firmly under way. Analysts say companies will largely meet, if not beat, expectations, creating more opportunities for stock gains.

"We're getting some indications that the rally was actually based on something fundamental" rather than investors' expectations, said Ed Peters, chief investment officer at PanAgora Asset Management Inc. in Boston. "With all this news coming together, it's mostly good."

He added, "there's still a little upside to the current rally. But I'm not sure the (earnings) news is going to be so good that the market can start another leg up."

Two merger announcements today gave the market a boost.

Overture Services climbed $2.54 to $24.05 after Yahoo! agreed to buy the Web-search advertising company in a deal worth about $1.63 billion. Yahoo inched up 1 cent to $32.20.

OfficeMax surged $1.42 to $8.60 after Boise Cascade agreed to buy the office-supplies retailer for nearly $1.2 billion in cash and stock; the deal will double the size of its office products distribution business. Boise Cascade declined $1.56 to $21.87.

McDonald's dropped 66 cents to $21.92 even though the fast-food chain said it expects to meet Wall Street's estimates for second-quarter profit; the earnings, however, are still 2 cents per share lower than results at the same time last year.