A late rally helped propel the Dow to a positive finish Monday as financial stocks rebounded.
The Dow Jones Industrial Average gained 76.71, or 0.8 percent, to close at 9,789.44. The Nasdaq added 0.2 percent and the S&P 500 advanced 0.7 percent.
Stocks had charged out of the gate, with the Dow up more than 140 points, after a report showed manufacturing expanded more than expected last month. Then, stocks retreated around midday, led by financials and techs, before clawing back in the last few hours of trading.
American Express was the biggest gainer on the Dow, followed by United Technologies and JPMorgan.
Bank of America eked out a 0.3-percent gain after starting the day at the top of the Dow pack, then falling to the bottom, before crawling higher.
Citigroup shed 2.4 percent, finishing below $4 a share, a level it hasn't seen since mid-August.
Traders said it was one-two punch for financials that caused that midday bobble: It was in part Citi's drop below $4 but also testimony from Jon Greenlee, director of the Fed's Division of Banking Supervision and Regulation, to a House panel, warning about banks' potential losses from commercial real-estate loans.
Telecoms Verizon and AT&T were among the drags on the Dow as investors took profits after the sector's recent gains.
Intel also dragged on the Dow as techs were weak after a report showed chip sales rose in the third quarter but revenue remains below year-ago levels.
Stocks got off with a surge this morning after the ISM reported its gauge of manufacturing activity in the U.S. came in at 55.7 in October, the third straight month of growth and the highest reading since April 2006. Anything above 50 indicates expansion. Economists had expected the gauge to rise to 53.
The encouraging reading on U.S. manufacturing came after three reports from around the globe showed an improvement in manufacturing: First, a report showed China's manufacturing sector expanded at its fastest pace in 18 monthsin October amid rising demand from both overseas and at home. Then, a report showed factory activity in the euro zone expanded for the first time in 17 months and also picked up in the U.K.
Among the other U.S. economic data this morning: Pending-home sales rose to their highest level in nearly three yearsin September, boosted by the first-time homebuyers tax credit. Also for September, construction spending rose 0.8 percent.
The market rebound came after Friday, when the Dow and S&P 500 experienced their biggest one-day percentage dropssince July.
Among the early buzz in the market, Ford stunned Wall Street, reporting a quarterly profitand saying that 2011 should be "solidly profitable." Analysts had expected Ford to post a loss of 11 cents a share, but the company instead earned seven cents. Ford shares jumped more than 8 percent.
This came a day before automakers report their October sales. Analysts say sales likely rose last month but caution that they are still at 1980s levels.
A couple days before retailers report on their October sales, Wal-Mart once again slashed its toy prices. Wal-Mart shares rose 1.2 percent.
Retailers are expected to report an uptick in salesbut analysts remain wary about the outlook for the holiday season.
Retailers started the day mostly lower but recovered and finished the day mostly higher. Department stores Sears and Bon-Ton skidded, while Gap and Bed, Bath & Beyond were among the sector's notable gainers.
In the morning's other earnings news, Clorox reported its profit jumped 23 percent as consumers stocked up on disinfectant products amid swine-flu fears. Its shares rose 0.3 percent.
Human Genome Sciences shares soared 35 percent after the company said its experimental lupus drug was successful in a second clinical trial. It would be the first new lupus treatment in 50 years.
Also in the sector, Vertex Pharma shares leaped 7.7 percent after the company said a phase II study showed that twice-daily treatments of its experimental hepatitis C drug telaprevir worked as well as three times a day.
Elsewhere, Royal Caribbean shares gained after an upgrade from Wells Fargo, and Progressive shares jumped after Barron's said the insurer was set to expand earnings and revenue for the first time in years.
CIT Group shares tumbled 65 percent to 25 cents in their last official day of trading. The small-business lender officially filed for bankruptcy protection over the weekend following the failure of a proposed debt exchange offer to bondholders. The filing is one of the biggest in U.S. corporate history.
In M&A news this morning, Denbury Resources has agreed to buy Encore Acquisition for $3.2 billion in cash and stock, creating one of North America's largest oil production and exploration companies. The deal represents a 35 percent premium for Encore shareholders.
Denbury shares fell 10 percent, while Encore shot up 21 percent.
After the closing bell, tool maker Stanley Works announced plans to buy rival Black & Decker for $4.5 billion.
Investors may experience a case of pre-Fed meeting jitters this week, but also have a number of key economic stats and earnings to get through as well: Auto sales are due out on Tuesday, ISM services on Wednesday, retail sales on Thursday and the October jobs report on Friday.
TUESDAY: Two-day Fed meeting begins; Auto makers report October sales; Madoff accountant hearing; election day; factory orders; Earnings from UBS, MasterCard, Viacom and Kraft
WEDNESDAY: Weekly mortgage applications; ISM services index; weekly crude inventories; Chrysler business plan; Fed statement; Earnings from Comcast, Time Warner, Martha Stewart, Cisco, News Corp., Prudential and Qualcomm
THURSDAY: Retailers report October sales; BOE, ECB statements; weekly jobless claims; Earnings from Toyota, CVS, Sirius, Unilever, CBS, Nvidia and Starbucks
FRIDAY: October jobs report; Geithner speaks; Droid phone launches; wholesale trade; consumer credit; Fed's Duke speaks
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