NEW YORK (CNNMoney.com) - Falling oil prices sparked a broad stock rally Monday, with the S&P 500 index closing just below a 4-1/2 year high.

The Nasdaq composite (up 20.14 to 2,307.18, Charts) gained around 0.9 percent, boosted by strength in Internet and software shares. The Dow Jones industrial average (up 35.70 to 11,097.55, Charts) added 0.3 percent.

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The Standard & Poor's 500 (up 4.69 to 1,294.12, Charts) index gained nearly 0.4 percent, just short of a four-1/2 year high.

Treasury prices inched lower, raising the corresponding yields. The dollar was mixed versus other major currencies.

Crude oil lost around three percent and the price of gold declined too.

The session's gains were based on a mix of people thinking the economy is doing well, oil prices moderating, and the fact that the market for the most part is between earnings reports and Fed meetings, said Harry Clark, founder and CEO of Clark Capital Management Group.

But he said that the lack of strong volume, as well as other technical factors, made him skeptical of the longevity of the advance.

"I think it's a rebound rally, with stocks basically moving back to the top of the range we've been in," Clark added.

Tuesday brings a number of economic reports, including reads on existing home sales, consumer confidence and the revised read on gross domestic product growth in the fourth quarter.

As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to a slightly higher open for stocks Tuesday, when fair value is taken into account.

Certainly falling oil prices played a big role in the day's advance.

U.S. light crude oil for April delivery fell $1.91 to settle at $61 a barrel on the New York Mercantile Exchange due to an easing of concerns about Iran potentially developing nuclear weapons. The easing occurred amid reports of progress in talks between Russia and Iran, OPEC's no. 2 oil producer.

However, it was not just the drop in oil prices that was lifting stocks, but the perception that certain geopolitical issues have improved, said John Davidson, president and CEO, PartnerRe Asset Management.

He noted that last week, the run up in oil prices was related to an attempted attack on supplies in Saudi Arabia, as well as issues in Nigeria, Iran and Iraq.

"Some of that risk has been taken off the table," Davidson said. "That can be seen in the falling price of oil and a rise in equities."

Overall, stock gains were broad, with a variety of Dow 30 blue chips rising.

Hewlett Packard (up $1.39 to $33.41, Research), Microsoft (up $0.42 to $27.05, Research) and Caterpillar (up $0.80 to $73.50, Research) were among the biggest gainers.

Fellow Dow stock Intel (up $0.16 to $20.52, Research) rose on an analyst upgrade, and helped lift the broader chip sector.

Walt Disney (up $0.40 to $28.38, Research) shares gained after a weekend article in financial weekly Barron's speculated that Apple (down $0.47 to $70.99, Research) might try to buy Disney now that Apple founder Steve Jobs has joined Disney's board and is its biggest individual shareholder.

Lowe's (up $3.78 to $69.30, Research) jumped after reporting higher-than-expected fiscal fourth-quarter earnings. The home improvement retailer also issued a first-quarter and full-year earnings per share forecast that was above expectations.

That gave a boost to rival Home Depot (up $0.82 to $42.45, Research), a Dow component.

Dow component Verizon Communications (up $0.25 to $34.06, Research) rose modestly after the company said that 2006 earnings will narrowly beat analysts' current forecasts.

In merger news, British utility National Grid said it will buy natural gas distributor KeySpan for $7.3 billion in cash plus assumed debt of $4.5 billion. Shares of KeySpan (down $0.65 to $40.76, Research) inched lower.

A merger in the defense sector was also announced. Armor Holdings, which makes vehicle-armor and other security products said it would buy military truckmaker Stewart & Stevenson Services for about $1.1 billion in cash.

Shares of Armor (up $3.67 to $59.13, Research) jumped 6.6 percent, while shares of Stewart & Stevenson (up $7.23 to $34.33, Research) jumped 27 percent.

Investors also took in a report showing that the pace of new home sales in January fell five percent from the revised December level.

While the report didn't seem to impact the overall market much, it did serve to spark some selling in the homebuilding sector. The Dow Jones Home Construction (down $15.08 to $903.78, Research) index lost 1.6 percent.

In addition, oil stocks slipped along with the price of the commodity, with the Philadelphia Oil Service (Charts) sector index losing 2.5 percent.

Market breadth was positive. On the New York Stock Exchange, winners topped losers by more than nine to seven on volume of 1.43 billion shares. On the Nasdaq, advancers topped decliners three to two on volume of 1.75 billion shares.

COMEX gold for April delivery fell $3.80 to settle at $557.40 an ounce.

Treasury prices fell modestly, raising the yield on the 10-year note to around 4.59 percent from 4.57 percent late Friday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar gained versus the euro and fell versus the yen.

In global trade, major Asian and European markets ended higher.

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