Lowe’s better-than-expected profit report and positive comments from analysts about U.S. banks renewed investors’ hopes for an economic rebound. Last week, worries that a recovery might be further off than hoped interrupted the rally that has left the Standard & Poor's 500 index up 34.5 percent since March 9.  

Home values' sharp decline have been at the heart of the economy’s woes, cutting into consumers’ wealth and burdening banks with tremendous losses. Analysts believe that the housing and banking industries must be stabilized for the economy to rebound.  

"There's a realization that things are going to get better," said James Cox, managing partner at Harris Financial Group. "That's the main theme of the market over the last couple of weeks."

Even with Monday’s high note, the market is expected to remain volatile as investors look for signs that the economy is actually recovering — not just slowing its descent.

Signs of stabilization were enough to encourage investors to buy stocks back in March. Linda Duessel, equity market strategist at Federated Investors, said the rally has been driven by "less bad" information.

"Probably, we'll get bored with that as the months progress," Duessel said. "We'll need something better to move the market."

According to preliminary calculations, the Dow rose 235.44, or 2.9 percent, to 8,504.08. That was the biggest point gain since a 246-point jump on April 9.

The S&P 500 index rose 26.83, or 3 percent, to 909.71, and the Nasdaq composite index rose 52.22, or 3.1 percent, to 1,732.36.