NEW YORK (CNNMoney.com) -- Stocks closed higher Monday, recovering from earlier weakness, as optimism about corporate results due this week outweighed ongoing concerns about the economy.
Stocks opened higher but struggled to gain momentum for most of the day as investors responded to a report that showed homebuilder confidence fell to a 15-year low in July, raising concerns about other housing reports due later this week.
But the major indexes rallied in the afternoon as investors geared up for key corporate results due this week, including reports from blue chips such as Microsoft (MSFT, Fortune 500), AT&T (T, Fortune 500), Coca-Cola (COKE) and American Express (AXP, Fortune 500).
After the market closed Monday, IBM reported (IBM, Fortune 500) earnings per share that beat analysts' expectations, but second-quarter revenue fell short of the mark. Shares of the tech giant sank 5% in extended trading.
While IBM's results reflected worries that the strong profits reported so far are due mostly to cost cuttings and not sales growth, the tone of the second-quarter reporting period has been relatively upbeat.
Of the companies that have reported so far, about 75% have beaten earnings expectations and 71% have topped revenue forecasts. Including those that reported Monday, a total of 122 companies are slated to post results this week.
Meanwhile, investors are also bracing for key economic data on the calendar this week, including reports on housing starts and building permits Tuesday morning. A report on existing home sales comes out later in the week.
Traders said the market has been pulled between ongoing fears that the U.S. economy could fall back into recession later this year and optimism about corporate profits in the second quarter.
"There doesn't seem to be a specific trend developing within this enormous volatility," said Hugh Johnson, chairman of Johnson Illington Advisors. "There is a very strong argument to be made on both sides."
Last week, a drop in consumer sentiment, along with weak earnings from financial firms Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500), pressured stocks at the end of the week and dragged the Dow down by 261 points on Friday.
Housing: The National Association of Home Builders said its index of builder confidence in the market for new single-family homes fell in July to the lowest level since April 2009.
The Housing Market Index fell two points from a downwardly revised number in the previous month to 14 for July, according to NAHB.
NAHB chairman Bob Jones said in a statement that the decline in builder confidence reflects the expiration of a popular tax credit, tight credit conditions and persistently high unemployment.
Ireland, Hungary: Moody's Investors Service cut Ireland's government bond ratings to Aa2 from Aa1 on Monday, citing weakening growth prospects and mounting debt.
The downgrade was "primarily driven by the Irish government's gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability," said Dietmar Hornung, Moody's lead analyst for Ireland.
Meanwhile, talks between Hungary and the International Monetary Fund reached an impasse over a $25 billion aid package the country accepted in 2008 from the IMF and European Union.
Delta (DAL, Fortune 500) reported adjusted earnings per share for the most recent quarter that beat analysts' expectations. But shares of the airline fell 3% as investors responded to weaker-than-expected sales growth in the quarter.
World markets: European shares gave up an early rally. The DAX in Germany, France's CAC 40 and Britain's FTSE 100 all fell between 0.2% and 0.5%.
In Asia, the Hang Seng in Hong Kong lost 0.8%, while the Shanghai Composite added 2%. Japanese markets were closed on Monday.
Dollar and commodities: The dollar was down against the euro, but up versus the British pound and the Japanese yen.
U.S. light crude oil for August delivery rose 50 cents to settle at $76.51 a barrel.
COMEX gold's August contract fell $4.40 to end at $1,183.80 per ounce.
Bonds: Treasury prices fell, pushing the yield on the 10-year note up to 2.96% from 2.93% late Friday. Bond prices and yields move in opposite directions.
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