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Stocks Get a Jolt of Optimism; Banks Rally

Published: Monday, 5 Oct 2009 | 4:02 PM ET

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By: Cindy Perman
CNBC.com

Stocks rebounded Monday as investors' waning enthusiasm got a jolt from a report that showed the services sector has begun to expand. Plus, there was some bargain hunting after the market's two-week decline.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

The Institute for Supply Management reported its gauge of service-sector activity, which accounts for 70 percent of the economy, rose to 50.9 in September from 48.4 in August. The reading indicates expansion in the sector after 11 straight months of contraction and was better than the 50 economists had expected.

Stocks held onto gains amid enthusiasm for the 10-year TIPS auction: The high yield was 1.51 percent and the bid-to-cover ratio was 3.12.

Brocade Communications [BRCD Loading... () ] shares soared following news that data-equipment storage maker is putting itself up for sale. The Wall Street Journal identified Oracle [ORCL Loading... () ] and Hewlett-Packard [HP Loading... () ] as possible bidders.

FOR INVESTORS

In other deal news, Ford [F Loading... () ] may have another interested buyer for Volvo, with the Financial Times reporting that A U.S. led consortium may challenge China's Geely Automotive in bidding for the unit. The consortium is led by former Ford director Michael Dingman and former auto executive Shamel Rushwin.

Shares of Wells Fargo [WFC Loading... () ] shot up after Goldman Sachs upgraded the large-cap banking sector — including WFC — to "attractive" from "neutral," saying the shares are undervalued compared to their earnings potential.

Goldman Sachs [GS Loading... () ] shares gained a day after a report said the company would be due a $1 billion payment should CIT Group [CIT Loading... () ] file for bankruptcy. The money would come from a financing package Goldman gave the commercial mortgage giant in June 2008, according to the Financial Times.

Bank of America [BAC Loading... () ] advanced following a CNBC report that the company likely would be selecting a successor very soon for departing CEO Ken Lewis.

American Express [AXP Loading... () ] shares rose. President Alfred Kelly announced he is stepping down from his post as early as next year in order to pursue a CEO job elsewhere.

IBM shares [IBM Loading... () ] ticked higher after the tech giant announced it has agreed to buy the core operating assets of Bank of America's mortgage-servicing unit, Wilshire. IBM is taking on all 900 employees of the unit, but a price tag wasn't disclosed.

Prudential Financial [PRU Loading... () ] shares advanced after the company announced it's considering selling its investment and fund-management businesses in South Korea in a deal that could be valued at $850 million.

Investors scooped up some bargains ahead of earnings season, which kicks off this week with a report from Alcoa [AA Loading... () ] on Wednesday.

The S&P 500 index soared 60 percent from March to late September but has fallen about 4 percent since then amid concerns about the economic recovery.

Britain's service sector expanded at its fastest pace for two years in September, and companies were more optimistic about the next 12 months than at any time since April 2007, data from the UK showed.

In the euro zone, the services economy returned to growth for the first time in 16 months in September at a slightly better rate than first expected, but job losses increased.