Investors bought up stocks as crude oil, which had closed above $60 per barrel yesterday for the first time, fell to $58 amid profit-taking following the recent runup in prices. Light crude settled at $58.20, down $2.34, on the New York Mercantile Exchange.

In addition, the Conference Board's consumer confidence index rose to its highest level since 2002, and consumers' optimism about the future also rose. That gave the market enough impetus to rebound from last week's oil-driven selling that sliced more than 325 points from the Dow.

"The selloff last week was a little much based on the underlying economic fundamentals," said Scott Wren, equity strategist for A.G. Edwards & Sons. "Companies were able to make plenty of money over the last two quarters when oil was in the mid-$50s, and consumers will continue to spend money at these levels. It was just over done, and we're getting some of it back now."

The Dow rose 114.85, or 1.12 percent, to 10,405.63.

Broader stock indicators also moved sharply higher. The Standard & Poor's 500 index closed up 10.88, or 0.91 percent, at 1,201.57, and the Nasdaq composite index climbed 24.69, or 1.21 percent, to 2,069.89.

Bonds fell sharply after a long stretch of gains tied to concerns over oil. The yield on the 10-year Treasury note rose to 3.97 percent from 3.91 percent late yesterday. The dollar reached an eight-month high against the Japanese yen and rose slightly against the euro. Gold prices fell.

The market's upswing provided some stability going into Thursday, when the Federal Reserve will release its decision on interest rates less than two hours before the market closes and the second quarter ends. Investors hope the Fed will shed light on how long rates will continue to rise, as well as the impact of oil on the economy.

"It's good to see the dollar rise. It's good to see oil come down. And it's good to see consumer confidence numbers like this," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "But we still have problems out there that need to be addressed, starting with the Fed. So while we have a nice move higher, it likely won't last that long."

Starting on Thursday with the Fed and stretching through July, investors will be inundated with economic data and the first wave of second-quarter earnings reports. The upcoming news will likely keep investors on the sidelines until the market can sift through the data and choose a direction.

Analysts at Morgan Stanley raised its price target for crude oil to $50 per barrel in 2005 and 2006, up from a $43 per barrel projection earlier this year. The company also singled out a handful of companies as benefiting from the higher price of crude. Exxon Mobil Corp. shed 21 cents to $59.09, while ConocoPhillips lost $1.42 to $58.10; both were mentioned in the Morgan Stanley report, but were pressured by the sharp drop in crude prices.

Advanced Micro Devices Inc. rose $1.02 to $17.70 after the semiconductor maker sued rival Intel Corp. for antitrust violations. AMD claims Intel has a monopoly in computer processors and has forced customers into exclusive contracts to protect that monopoly. Intel added 47 cents to $26.33 on the news.

IBM Corp. announced late yesterday that the Securities and Exchange Commission has launched an informal probe into how the company released data on its employee stock option accounting. IBM nonetheless climbed $1.42 to $75.30.

Sun Microsystems Inc. gained 5 cents to $3.74 after it announced it would buy business software maker SeeBeyond Technology Corp. for $387 million in cash, or $4.25 per share. SeeBeyond surged 30.7 percent, or $1.01, to $4.29.

Advancing issues outnumbered decliners by nearly 5 to 2 on the New York Stock Exchange, where preliminary consolidated volume came to 1.77 billion shares, compared with 1.75 billion traded yesterday.

The Russell 2000 index of smaller companies was up 13.17, or 2.1 percent, at 641.48.

Overseas, Japan's Nikkei stock average rose 0.87 percent. In Europe, Britain's FTSE 100 closed up 0.93 percent, France's CAC-40 climbed 0.88 percent for the session, and Germany's DAX index gained 0.74 percent.