By Rodrigo Campos
NEW YORK (Reuters) - U.S. stocks rebounded on Monday, following a sharp selloff in the previous session, with Citigroup's earnings and retail sales lifting sentiment while traders kept tabs on the possible escalation of hostilities in Ukraine.
Citigroup shares led the financial sector higher after the bank said its quarterly net profit rose because of a smaller loss on its troubled assets. The stock rose 4.6 percent to $47.78. The S&P financial index gained 0.8 percent.
"This is a reflex rally. We're bouncing back, probably on Citi. It's the first kind of OK news on banks we get in a couple of weeks," said Jack de Gan, chief investment officer of Harbor Advisory Corp in Portsmouth, New Hampshire.
Futures had gained earlier after data showed U.S. retail sales recorded their largest increase in 1-1/2 years in March, in the latest sign that the economy was emerging from its weather-induced slumber.
"People are trying to figure out how much of the (recent data) weakness was weather related," de Gan said. "When you see pent-up spending like this, it validates the idea it was because of the weather."
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The Dow Jones industrial average rose 147.35 points or 0.92 percent, to 16,174.10. The S&P 500 gained 16.4 points or 0.9 percent, to 1,832.09. The Nasdaq Composite added 38.216 points or 0.96 percent, to 4,037.95.
Pro-Russian separatists ignored an ultimatum to leave occupied government buildings in eastern Ukraine as a threatened military offensive by government forces failed to materialize. Rebels in the town of Slaviansk issued a bold call for Russian President Vladimir Putin to help them.
Tension between Moscow and the United States increased over the weekend as a Russian fighter aircraft made repeated low-altitude close-range passes near a U.S. ship in the Black Sea.
Russian stocks fell 1.3 percent and the rouble hit its weakest in three weeks against the U.S. dollar as Ukraine's preparedness to fight heightened fears of Russian military intervention and more Western sanctions against Moscow.
Brent crude prices climbed on concerns about supply disruptions or sanctions against Russia. The S&P energy index rose 1.4 percent and was the best-performing sector.
Harbor Advisory's de Gan said the market should be more concerned about military intervention from Russia.
"That would give the market reason for a further correction," he said.
On Friday, JPMorgan's disappointing earnings were partly to blame for the day's selloff. Biotech and other momentum stocks led the Nasdaq Composite lower, pushing the index below 4,000 for the first time in two months. The Nasdaq biotech index on Friday closed 21 percent below its record closing high hit Feb. 25, entering bear market territory.
Biotechs, however, outperformed the market on Monday. The sector index shot up 1.3 percent.
Medtronic shares fell 1.5 percent to $58.29, paring a sharper loss in premarket trading, after a U.S. court ruling temporarily stopped sales of the company's aortic heart valve replacement system, called CoreValve, in the United States because of a patent infringement. Shares of Medtronic's rival, Edwards Lifesciences, which was on the other side of the ruling, rallied 12.9 percent to $82.35.
Shares of Aspen Insurance Holdings jumped 10.6 percent to $43.54 after Endurance Specialty offered to buy Aspen for $3.2 billion in cash and stock. Endurance shares fell 1.4 percent to $53.09.
(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama, Meredith Mazzilli and Jan Paschal)