NEW YORK (CNN/Money) - Stocks rallied Monday, recovering from Friday's selloff, powered by a merger in energy, an upbeat read on housing and an upgrade of tech stock favorite Apple Computer.

The Dow Jones industrial average (up 84.76 to 10,242.47, Charts) added 0.8 percent and the broader Standard & Poor's 500 (up 9.98 to 1,162.10, Charts) index added around 0.9 percent. The Nasdaq composite (up 18.59 to 1,950.78, Charts) gained nearly 1 percent.

News of a multi-billion energy merger helped boost stocks, as investors took comfort in the fact that companies are willing to spend, despite spotty signs of slowing economic growth.

Upgrades in technology and telecom helped those sectors, while Boeing helped fire up the Dow with a lucrative new contract from Air Canada.

However, the light trading volume Monday hinted that investors were still wary after last week. Last week was particularly choppy as the major gauges fell to fresh yearly lows amid worries about slowing earnings and economic growth, before managing to turnaround near the end of the week.

If stocks can build on that turnaround and extend Monday's gains throughout the week, that would be significant, said Donald Selkin, director of research at Joseph Stevens, in that it would imply that a bottom had been put in place.

The week is heavy on earnings news from influential companies -- such as Microsoft and Exxon Mobil -- and economic news on gross domestic product growth and other aspects of the economy.

"If we can hit these economic numbers and the earnings are good, and we can chug a little higher this week, that would be helpful," Selkin added. "The wild card is still oil."

Reports due before the open Tuesday include Coach, DuPont, Lexmark, Martha Stewart Living Omnimedia, Schlumberger and U.S. Steel. Dow component American Express reports results during the day Tuesday.

The read on April consumer confidence is also due before the open, and Selkin says that it could be weaker than expected, in light of the recent spike in oil prices and the struggling stock market.

The report on new home sales for March is due shortly after the open. It's expected to show a decline from February's levels.

Among the deals announced, Valero Energy (up $0.83 to $75.87, Research) said it will buy Premcor (up $10.70 to $69.70, Research) for $6.9 billion in cash and stock. The acquisition would create the biggest crude oil refiner in North America, overtaking current leader Exxon Mobil (up $0.54 to $59.96, Research).

Valero shares added 1 percent, while Premcor shares rallied 18 percent.

Apple Computer (up $1.48 to $36.98, Research) spiked after Credit Suisse First Boston upgraded the stock to "outperform" from "neutral," due to forecasts for growth in personal computer sales.

Existing home sales rose to a 6.89 million unit annual rate in March from an upwardly revised 6.82 million unit rate in February, according to a report released shortly after the open. Economists surveyed by Briefing.com were expecting sales to come in at 6.80 million units.

That gave a boost to homebuilders, with KB Homes (up $3.76 to $112.96, Research) and Toll Brothers (up $2.86 to $75.36, Research) leading the way. The Dow Jones Home Construction (up $25.55 to $820.67, Research) index added 3.2 percent.

"Today is encouraging, but it's not particularly meaningful," said James Awad, Chairman at Awad Asset Management. "We still have a lot of economic and earnings news to get through this week."

"We know that we're going to have inflation and higher interest rates, that's a given," he added. "But what we want to see this week is that the economic growth is strong and that the earnings are solid."

Boeing (up $1.70 to $59.58, Research) gained close to 3 percent and was the Dow 30's biggest gainer. The company said that Air Canada has opted to renew its fleet of wide body jetliners, with 32 firm orders and options for up to 64 more.

Separately, Boeing was featured favorably in a Barron's cover story over the weekend.

SBC Communications (up $0.12 to $23.32, Research), also a Dow stock, reported earnings, excluding charges, of 34 cents per share, a penny more than expected, on revenue that was in line with estimates. SBC shares inched higher.

General Motors (up $0.01 to $26.75, Research) said it is recalling more than two million vehicles in North America, due to a slew of potential safety defects. After sliding modestly throughout most of the session, GM managed to end little changed.

MCI (down $0.02 to $26.67, Research) said over the weekend that Qwest (unchanged at $3.55, Research)'s $9.7 billion takeover bid is better than its $7.8 billion merger agreement with Verizon Communications (unchanged at $34.06, Research), throwing another loop in the ongoing battle for the long-distance provider. Verizon has five business days to respond.

On the downside, DoubleClick (down $0.45 to $8.12, Research) fell more than 5.2 percent in active Nasdaq trade after saying that it agreed to a $1.1 billion buyout from a private equity firm. The deal had been talked about for some time, sending its stock up higher than the final offer of $8.50 per share.

Market breadth was positive and volume was light. On the New York Stock Exchange, winners beat losers 11 to five on volume of 1.42 billion shares. On the Nasdaq, advancers topped decliners three to two as nearly 1.48 billion shares traded hands.

U.S. light crude oil for June delivery fell 82 cents to settle at $54.57 a barrel on the New York Mercantile Exchange. Earlier, oil had touched $56 in electronic trading.

Treasury prices were little changed, with the 10-year note yield holding around 4.25 percent.

In currency trading, the dollar rose versus the euro and was little changed versus the yen.

COMEX gold added 20 cents to settle at $435.80 an ounce.