Dow gains 229, exits correction territory

After posting its best weekly gain in what has been a dismal start to 2016, stocks kicked off the new week in rally mode as investors reacted to rising oil prices and signs of stability in China's stock market.

After rallying nearly 420 points, or 2.6%, last week, the Dow Jones industrial average ended up 229 points and exited correction territory — meaning it's now down less than 10% from its May peak. The Dow is now down about 9% from its record close of 18,312.39.

The broader Standard & Poor's 500 stock index and the Nasdaq composite each ended 1.5% higher, slightly more than the Dow's 1.4% gain.

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The S&P 500 started the day a mere 0.04 points above its correction level. The Nasdaq must gain another 2.8% to get out of its correction zone.

Boosting market sentiment to start the week was a big jump in the price of U.S.-produced crude back above the key $30 per barrel mark and a move by Chinese authorities to boost investor confidence by naming a new regulator to police its volatile stock market.

U.S. benchmark crude was up 7.3% to $31.80 a barrel.

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Last week, stocks rallied sharply as investors swooped into pick up some bargains after the steep selloff to start the year. Wall Street also got a boost from news that Saudi Arabia, Russia and other major oil producers were considering a production freeze, a move, if it comes to fruition, is seen as the first step to stabilize oil prices. Rising hopes of a coming output freeze is also helping stock markets turn back up.

This week Wall Street will be closely eyeing economic data and earnings from major retailers to get a better gauge of the health of the U.S. economy and American consumer.

Investment strategists cited better economic data in the U.S. for last week's rally, and say more good incoming data is needed for the current rally to be sustainable.

"Investors might have missed it given the fireworks in stock prices as of late, but the market low on February 11 appears to have coincided with more than just oil. The economic data has improved a bit since then as well," Gina Martin Adams, equity strategist at Wells Fargo Securities, wrote in a report.

"We believe progress in the economic data," adds Adams, "will likely determine the difference between a bear market bounce and a more durable recovery in the broad market."

Stocks rallied around the globe early Monday. In Europe, the broad Stoxx Europe 600 was up 1.7%, building on gains in Japan, where the Nikkei 225 closed up nearly 1%. Stocks in mainland China's Shanghai composite rallied 2.4%.

"Everything is coming off of the lows right now," says Gary Kaltbaum, president of Kaltbaum Capital Management, adding that the market is now in "rally mode of unknown price and time."

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Adam Shell on Twitter: @adamshell.