Stocks bounced back Monday after oil prices threatened to keep them in the doldrums.

Oil prices dropped away from a record high above $67, and light, sweet crude for September delivery fell 59 cents to settle at $66.27 a barrel on NYMEX.

Investors welcomed the development, and after falling in early-morning trading, the blue-chip Dow Jones industrial average (search) gained 34 points to settle at 10,634. The technology-laced Nasdaq Composite Index (search) rose 10 points to end at 2,167.

The broader Standard & Poor's 500 index ended more than 3 points up to finish at 1,233, helped in part by shares of Apple Computer (AAPL) and Time Warner Inc. (TWX).

"It's a relief reaction," said Jim Awad, chairman of Awad Asset Management, in New York. "You had a modest reflex reaction to the fact that oil was down."

The easing in oil prices came after a week in which NYMEX crude futures hit new highs each day, culminating with a record high at $67.10 on Friday. High oil prices are typically a negative for stocks since they drive up many corporate costs and eat into consumers' discretionary spending.

Analysts said they expect stock investors to keep a close eye on oil prices for the rest of the week.

"We're going to be very sensitive to oil, without a doubt," said Scott Wren, senior equity strategist at A.G. Edwards & Sons, of St. Louis.

Oil has been the biggest negative variable investors have been facing, he noted.

"There's been a lot of good economic news, inflation is low," Wren said. "The market wants to go up."

But Monday's gains were not exactly cause for celebration — volume was light. On the NYSE, 1.18 billion shares changing hands, below the 1.46 billion daily average for last year. About 1.38 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.

The number of shares advancing in value exceeded the number declining by a ratio of more than 9 to 7 on the NYSE and by about 3 to 2 on Nasdaq.

With earnings season winding down and no dramatic economic releases for the day, traders had little to motivate them.

"As long as the price of oil remains above $65 a barrel, investors are going to be very guarded and volume low," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "The other potentially exciting event is housing prices ... Sales of new homes will be watched very carefully for any signal that the housing bubble is breaking."

Monthly data on existing home sales is due next Tuesday and data on new home sales is due next Wednesday.

Bonds fell, with the yield on the 10-year Treasury note rising to 4.28 percent from 4.25 percent late Friday. The dollar was up against the euro. Gold prices were lower.

One of the top gainers in the S&P 500 was Agilent Technologies Inc. (A), the world's largest maker of scientific-testing equipment. Shares rose 14.8 percent to $30.33 after the company earlier announced it will cut 1,300 jobs and sell its semiconductor business.

Shares in media company Dow Jones & Co. Inc. (DJ) rose 11 percent to $41.14 following a report in the New York Post that members of its controlling shareholder family were pressing for a sale of the Wall Street Journal publisher. A Dow Jones spokesman declined to comment.

Time Warner Inc. rose 1 percent to $18.50 after financier Carl Icahn disclosed that he and a group of investors will press the company to shed its cable TV unit and embark on an aggressive buyback of $20 billion of its own shares.

Shares of Apple, which makes Macintosh computers and iPod digital music players, rose 3.4 percent to $47.68 on Nasdaq after Piper Jaffray named it a top large-cap pick.

Among economically sensitive blue-chip Dow stocks, aircraft maker Boeing Co. (BA) rose 1 percent to $67.46 and consumer-products company Procter & Gamble Co. (PG) gained 1 percent to $54.18. Both trade on the NYSE.

Earnings at Lowe's Cos. Inc. (LOW), the nation's second-largest home improvement retailer, were 20 percent higher than a year ago. The company's shares rose initially, but later fell 2 cents to $65.17.

Wal-Mart Stores Inc.'s (WMT) weekend announcement that it expects August same-store sales growth to meet its prior forecast of 3 percent to 5 percent didn't inspire investors either. Wal-Mart fell 14 cents to $48.56.

Delta Air Lines (DAL) was the worst performer in the S&P 500. The stock plunged 13.7 percent to $1.39 on the NYSE after the New York Times reported on Saturday that the struggling air carrier has begun arranging the financing it would need, should it seek bankruptcy protection.

The Associated Press and Reuters contributed to this report.