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.
The Dow Jones Industrial Average jumped 112.08, or 1.2 percent, to close at 9,599.75. The S&P 500 rose 1.5 percent and the Nasdaq gained 1 percent.
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.
Banks led the rally after Goldman Sachs upgraded the large-cap banking sector to "attractive"from "neutral," saying the shares are undervalued compared to their earnings potential.
Wells Fargo, which was among those upgraded by Goldman, shot up 6.7 percent.
JPMorgan and Bank of America were among the biggest gainers on the Dow.
Bank of America is expected to be selecting a successor very soonfor departing CEO Ken Lewis.
- BofA's Krawcheck Skirts Question on Replacing CEO
American Express shares rose 2.3 percent. President Alfred Kelly announced he is stepping down from his post as early as next year in order to pursue a CEO job elsewhere.
Goldman Sachs shares gained 3.8 percent a day after a report said the company would be due a $1 billion paymentshould CIT Group 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.
IBM shares rose 0.6 percent 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 shares advanced 5.6 percent 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.
Plus, there was more M&A news today:
Brocade Communications shares soared 19 percent following news that data-equipment storage maker is putting itself up for sale. The Wall Street Journal identified Oracle and Hewlett-Packard as possible bidders.
And Fordmay have another interested buyerfor 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.
Earnings season kicks off this week with a report from Alcoa 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.
There was also some encouraging economic data out of Europe: Britain's service sector expanded at its fastest pace for two years in September, and companies there were more optimistic about the next 12 months than at any time since April 2007. 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.
Volume was below average, with 1.12 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 5 to 1.
Still to Come:
TUESDAY: IMF meeting; Fed's Fisher, Hoenig speak; Earnings from Yum Brands
WEDNESDAY: Weekly mortgage applications; weekly crude inventories; consumer credit; Earnings from Costco, Family Dollar, Alcoa
THURSDAY: Chain-store sales; foreclosure report; BOE, ECB rate decisions; weekly jobless claims; wholesale trade; Fed's Hoenig speaks; Earnings from Pepsi, Marriott, Chevron (interim)
FRIDAY: Market peak 2-year anniversary (Dow at 14,164.53); international trade
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