Nine of the 10 industry groups in the Standard and Poor's 500 index gained. Energy and financial stocks rose most. Chipmaker Atmel jumped after accepting a bid from Britain's Dialog Semiconductor.
KEEPING SCORE: The Dow Jones industrial average climbed 90 points, or 0.6 percent, to 16,471 as of 12:24 p.m. Eastern time. The Standard & Poor's 500 index rose seven points, or 0.4 percent, to 1,965 and the Nasdaq composite gained one point, or less than 0.1 percent, to 4,828.
FINANCIAL BOUNCEBACK: Stocks of major banks rose after sharp falls on Friday. Those declines were caused by fears that the Fed's decision to keep interest rates at historic lows would make it difficult for banks to charge their customers more to borrowers. Citigroup rose 41 cents, or 0.8 percent, to $50.71.
CASHING IN THE CHIPS: Atmel, a California-based semiconductor company, surged after the company accepted an offer worth about $4.6 billion in cash and stock from Britain's Dialog Semiconductor. Atmel provides electronics products used in the industrial, automotive, consumer, communications, and computing markets. Its stock jumped 96 cents, or 13 percent, to $8.23.
VW SKIDS: U.S.-traded shares of Volkswagen tumbled 18 percent to $29.89 following allegations that the German carmaker rigged U.S. emissions tests for about 500,000 diesel cars. The Environmental Protection Agency in the U.S. said the company had skirted clean air rules and could faces fines of more than $18 billion.
EUROPE RISING: Britain's FTSE 100 index rose 0.1 percent while the CAC-40 in France climbed 1.1 percent. Germany's DAX rose 0.3 percent.
FED IN REAR: The recovery in stocks in Europe and the U.S. comes after the Federal Reserve decided last week to keep its benchmark interest rate on hold, raising concerns about the outlook for global growth. That prompted the biggest drop in two weeks for U.S. stocks.
ENERGY: Benchmark U.S. crude rose $1.29 to $46.31 per barrel in on the New York Mercantile Exchange. Brent crude, used to price international oils, gained 84 cents to $48.31 in London.
CURRENCIES: The euro was down 0.9 percent at $1.1205 while the dollar rose 0.5 percent to 120.45 yen.
BONDS: Bond price fell. The yield on the benchmark 10-year Treasury note rose to 2.20 percent from 2.13 percent on Friday.