Stocks recovered from last week's drop to end higher across the board in another choppy session on Monday as investors continued to question when the Fed could begin to wind down its asset-purchase program.
(Read More:Here's Bernanke: Time for the Fed to Be Specific)
Stocks briefly took a leg lower as investors reacted to a Financial Times article, released around 2pm ET, which stated that Fed Chairman Ben Bernanke is likely to signal that the central bank is "close to tapering down" its $85 billion-a-month in asset purchases during the highly-anticipated press conference on Wednesday. Major averages had been up more than 1 percent for most of the day, boosted by a global rally and amid optimism that Bernanke would provide more clarity on the central bank's easy money policy.
Stocks eventually recovered from their lows as traders noted that the article did not contain much new information.
The Dow Jones Industrial Average finished 109.90 points higher at 15,180.08, logging its fifth-consecutive triple-digit move.
With the session's gains, the Dow and S&P 500 poked back into positive territory for the month.
Cyclical sectors including techs, energy and financials led the S&P 500 sector leaders, while telecoms ended in the red.
"Today's driver seat continues to be speculation about what Bernanke will do, but should the yen begin to spike again, they will resume taking the wheel immediately," said Art Cashin, director of floor operations at UBS Financial Services.
On the economic front, the New York Fed's "Empire State" manufacturing index gained to 7.84 in June from minus 1.43 in May, exceeding estimates for zero. A reading above zero indicates expansion. However, the forward-looking new orders index and employment reading weakened.
Meanwhile, homebuilder sentiment jumped, with the NAHB/Wells Fargo Housing index soaring to 52 in June from 44 in May. It was the first time the index rose above 50 for the first time since April 2006. Reading above 50 signal that more builders view market conditions a favorable than poor. All major homebuilders including Toll Brothers and KB Home added to gains following the report.
The two-day Fed meeting, ending on Wednesday with a press briefing and economic forecast from Bernanke, will be the main focus for global markets this week. Investors will be listening for details on when the Fed may start scaling back its $85 billion monthly bond purchases.
"There's been a tug-of-war in the market [in the last few sessions], but investors are anticipating some more clarity coming from the FOMC meeting on Wednesday," said Matt Kaufler, portfolio manager of the Federated Clover Fund. "My personal view is that the dips should be bought…as there's still room in the market left to the upside."
The Fed is also expected to provide an update on its economic projections for 2013-2015. The Fed's latest projections, made in March this year, saw real GDP growth at around 2.6 percent in 2013 and 3.2 percent in 2014. In terms of unemployment, the Fed projected a rate of around 7.4 percent in 2013, improving to around 6.9 percent in 2014.
"If, and how, these forecasts change could send an important signal about the Fed's near term intentions," said Scicluna.
In other news, U.S. crude oil prices may return to $100 per barrel this week, according to a CNBC sentiment survey, after prices rebounded to a nine-month high on Friday.
JPMorgan strategists said in a note that investors are ignoring the possibility of a price shock due to Mideast tensions that could sent Brent crude prices to $115 a barrel this year.
(Read More:$100 a Barrel Looms for US Crude This Week)