Stocks advanced on the first day of February, energized by an earnings beat from ExxonMobil and a strong manufacturing report.
Energy stocks were among the day's biggest gainers after Dow component ExxonMobil reported its profit fell 23 percent but still beat Wall Street estimates.
Industrials were also one of the strongest sectors, with Alcoa and DuPont at the top of the Dow pack, after a stronger-than-expected ISM manufacturing report.
The ISM reported its manufacturing gauge jumped to 58.4, stronger than expected, in January. Any reading over 50 indicates expansion.
Separately, personal income and spending rose in December, while construction spending fell 1.2 percent in the final month of 2009.
But ISM was what the market responded to. One thing traders fixated on in the report: Norbert Ore, chairman of the group, said a reading of around 58 typically correlates to GDP growth of 5.5 percent.
Plus, the ISM reading followed strong manufacturing reports from India, China, South Korea and Australia. Economists expect Australia may raise rates tomorrow by a quarter of a percentage point.
But Steve Grasso of Stuart Frankel cautions that despite all of the global manufacturing news, the S&P still hasn't broken the key 1,100 level yet.
"We haven't done that and that's worrisome to me," Frankel said on CNBC earlier. "Let the market prove itself above 1,100 in the S&P before you commit new capital."
The White House this morning revealed its 2010 budget, which showed the deficit likely to soar to $1.56 trillion this year, the highest since World War II, but falling to half that by the time President Obama's term ends in 2012. One takeaway from the report: The SEC's budget for policing Wall Street is being increased by 10 percent to $1.235 billion.
The Wall Street controversy over bonuses is likely to accelerate, with the Financial Times reporting that Goldman Sachs CEO Lloyd Blankfein could get a bonus of up to $100 million for 2009.
And Morgan Stanley reportedly plans to hire several hundred tradersover the next few years.
Amazon lost more than 6 percent after the company gave in to publisher Macmillanin a dispute involving e-book pricing. Macmillan wants to charge up to $14.99 for e-book versions of best sellers while Amazon had wanted to hold the line at its current price of $9.99.
Toyota officially announced a fix for the gas-pedal problem that triggered a massive recall of several Toyota model. It involves a shim that increases the tension on the pedal, thereby making it more difficult for it to stick.
Elsewhere in the auto sector, electric car maker Tesla Motors is expected to launch its $100 million IPO this week.
Apple led gainers on the Nasdaq after sliding last week.
Techs got a few votes of confidence from analysts: Merriman Curhan started coverage of Palm at "neutral," saying the latest versions of the Pre and Pixi have revitalized the company.
And Oracle got an "outperform" rating and $30 price target from Credit Suisse, which sounded an optimistic note about company spending on business software this year.
But Macy's was downgraded to "hold" from "buy" by Deutsche Bank.
In other earnings news, Medicare provider Humana reported its profit jumped 44 percent, in line with expectations, but its shares lost more than 2 percent. And Gannett , publisher of USA Today and the Indianapolis Star, reported it swung to a profit as ad sales improved but the stock tumbled on the company's tepid outlook.
— Reuters contributed to this article.
MONDAY: Bank of America/Merrill Lynch trial begins; construction spending; ISM manufacturing index
TUESDAY: Academy Award nominees announced; Madoff liquidation hearing; Volcker, Geithner testify; pending-home sales; auto sales; Earnings from BP, UPS (preannouncement), ADP and News Corp.
WEDNESDAY: Weekly mortgage apps; Challenger and ADP job-cuts reports; ISM services index; weekly crude inventories; Fed's Warsh speaks; Earnings from Pfizer, International Paper, Time Warner, Cisco, Visa and Yum Brands
THURSDAY: Senate hearing on NBC-Comcast; Tea Party Convention; chain-store sales; ECB, BOE announcements; weekly jobless claims; factory orders; Earnings from GlaxoSmithKline, Vodafone, Kellogg, MasterCard, Northrop Grmman, Sony, Unilever and Burger King
FRIDAY: Earnings from Aetna and Tyson Foods
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