Much of Wall Street's good will was carried over from Friday, when a strong employment report boosted investor confidence. But some analysts, noting that the light volume from last week also continued into yesterday, wondered how sustainable the rally was.

"The market seems to be going up because there aren't any sellers around, not because there's a lot of demand. That has a chance to end badly," said Richard Dickson, senior market strategist at Lowry's Research Reports. "Overseas markets are up strongly and oil's down, and I think what we're seeing is a little bit of a Pavlovian response to that more than anything else."

Investors were also cheered by a $4.85 billion proposed merger in the casino industry. With mergers and acquisitions gaining popularity, investors saw the trend as a sign of a stable, healthy economy.

Most U.S. financial markets will be closed Friday for a national day of mourning for former President Reagan.

After remaining low for most of the day, benchmark light sweet crude oil settled at $38.66, up 17 cents a barrel on the New York Mercantile Exchange. The slight rise was largely ignored by investors because many believe that if oil prices can at least remain under $40 per barrel, the market's current upward trend may stabilize.