Stocks were helped by the fact that oil prices backed away from $107 a barrel despite concerns the fighting in Iraq could threaten the country's ability to export oil. Natural gas prices also fell almost 1% after bouncing around earlier. Investors will continue to monitor for signs of higher energy costs to Western consumers and businesses.
There are worries that images reportedly showing the mass execution of Iraqi soldiers could spawn an all-out sectarian civil war in the country. The White House said it is considering military options and may even work with Iran to help Baghdad fend off the terrorist threat.
"Last week's fast-paced developments in Iraq have the potential to turn into a serious threat for the bull market," Ed Yardeni, president of Yardeni Research, wrote in a note to clients. "My hunch is that the latest geopolitical crisis could set the market up for yet another relief rally."
The geopolitical concerns helped drive European and Asian stock markets mostly lower on Monday.
2. Monday merger mania: Yet U.S. stocks were buoyed by the fact that cheap borrowing rates and tax policy continue to drive M&A (merger and acquisition) activity.
Medical device giant Medtronic(MDT)unveiled a $42.9 billion takeover Irish rival Covidien(COV). The deal is the latest "tax inversion" combination aimed at taking advantage of relatively low tax rates in some foreign countries by relocating corporate headquarters. Covidien soared over 20% on the news.
"Corporate America getting tired of waiting for comprehensive tax reform and choosing instead to move abroad $COV$MDT. Well good for them," wrote Stocktwits user flounder.
Williams Cos.(WMB) spiked almost 19% as investors cheered the energy company's $6 billion deal to take full control of Access Midstream Partners(ACMP).
In the tech world, SanDisk(SNDK) inked a $1.21 billion buyout of smaller data-storage company Fusion-io(FIO), representing a 21% premium on its closing price on Friday.
3. Corporate movers -- Yahoo, Tesla & Goodyear:Yahoo(YHOO, Tech30) retreated nearly 6% after Alibaba, the Chinese e-commerce giant it owns a chunk of, revealed new details of its planned initial public offering. The latest documents show Alibaba's revenue growth has slowed, though it was still up 39% year-over-year.
Likewise, the International Monetary Fund trimmed its forecast for U.S. economic growth this year to 2% amid the struggling housing market. Despite the gloomier view, the IMF still expects the U.S. to grow 3% next year.