The stock market benefited Monday from cheapening credit, a rally in the energy sector, and comforting words from Federal Reserve Chairman Ben Bernanke, who threw his support behind a second round of fiscal stimulus for the sagging U.S. economy.

Major indexes retreated from their morning highs but clung to gains in recent action. The Dow Jones Industrial Average, which was up more than 250 points at its high, recently traded 179 points higher, up 2%, at 9023.06. Its gains were led by energy components Chevron and Exxon Mobil, up about 7% each due to an uptick in oil prices.

The S&P 500 was up 2.2% at 961.42, helped by gains in all its sectors. Energy was the strongest, up more than 6%.

While there have been some promising signs lately that the recent financial crisis is receding, traders and analysts say there could yet be a long slog ahead as the economy works through what appears to be a painful global recession.

"I'm not convinced that we're out of the negative cycle," said Roger Volz, senior vice president and trader at Hampton Securities, a New York brokerage. "But the worst of the violence of the moves to the donwside has probably passed."

Looking at chart patterns from previous market downturns, Mr. Volz said that the Dow could yet reach a new trough, perhaps as low as 7000 sometime over the next two years. That would represent a 22.4% drop from its current level and an 11.2% dip below the intraday low reached on Oct. 10, which some traders still hope will stand as the nadir of the current bear market.

Other market measures edged higher in recent action. The technology-heavy Nasdaq Composite Index was up 0.5% at 1719.58. The small-stock Russell 2000 managed a 1.9% gain, trading at 530.70.

There were further easing in the bank-to-bank lending market, which has been at the heart of the recent crisis. Three-month dollar Libor, a key measure of interbank lending, slid to 4.05875% from Friday's fixing of 4.41875%. The latest fix is the lowest since Sept. 30. Meanwhile, the overnight rate fell to 1.5125% from Friday's 1.66875%, edging ever closer to the Fed funds target rate of 1.5%.

Treasurys were mixed. The yieled on three-month bills climbed over 1.1%, compared to about 0.8% late Friday, signaling that investors were less apt to hoard the paper as a safe-haven bet. The 10-year note's price rose 5/32, pushing the yield to 3.916%. The 30-year bond saw its price rise 16/32, pushing the yield to 4.302%.

Investors also paid close attention to Mr. Bernanke's testimony to the House of Representatives Budget Committee. In his opening remarks, Mr. Bernanke signaled that he supports a second round of fiscal stimulus by the government. "With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Mr. Bernanke said.

Separately, U.S. banking regulators and U.S. Treasury Secretary Henry Paulson encouraged financial institutions to seek capital from the government, outlining a streamlined process by which institutions can apply to be part of a $250 billion capital injection program announced last week.

Oil futures rose $1.50 to $73.35 a barrel in New York, as traders bet that the Organization of Petroleum Exporting Countries will cut production when its ministers hold an emergency meeting set for Friday.

Dutch bank and insurance company ING, which Sunday announced that it has secured a 13.4 billion capital injection from the Dutch state, saw its New York-listed shares rise about 31% in recent action.

American International Group rose about 7% amid reports from London that Prudential PLC may mount a $15 billion bid for the ailing insurer's Asian operations. Prudential shares leapt 19%.

The dollar strengthened against major rivals. One euro recently cost $1.3295, down from $1.3406 late Friday. The dollar fetched 101.64 Japanese yen, up from 101.45 yen.

—Brian Blackstone contributed to this article.

Write to Peter A. McKay at peter.mckay@wsj.com.