Stocks kicked off the first trading day of February with a bang, extending their robust rally from the previous month, boosted by some positive global economic news in addition to a report that Greece and its private creditors may soon agree upon a deal.
The Dow Jones Industrial Average rallied 83.55 points, or 0.66 percent, to close at 12,716.46, snapping a four-day losing streak. Hewlett-Packard and BofA led the blue-chip gainers.
The S&P 500 added 11.68 points, or 0.89 percent, to end at 1,324.09. The Nasdaq jumped 34.43 points, or 1.22 percent, to finish at 2,848.27.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended below 19.
All 10 S&P sectors ended firmly in positive territory, led by banks.
“Typically, when you see a strong January, a lot of the momentum tapers off in February,” noted Alan Gayle, senior investment strategist at RidgeWorth Capital Management. “[Still,] we remain cautiously optimistic on the markets and are overweight equities… it’s still early in the year, but I think this is going to be a better year for the economy and we’re going to see greater global stability and that should give a positive bias to equities.”
On the economic front, private employers added 170,000 positions in January, according to the ADP national Employment Report. The ADP report comes ahead of the closely watched government non-farm payroll report on Friday.
Nonfarm payrolls are expected to post a gain of 150,000 in January, according to a Reuters survey, with the unemployment rate seen holding steady at 8.5 percent.
“Given what we’ve seen in terms of the other economic data, the chances that we’ll meet the expectation number [on Friday] is quite good,” said Brian Gendreau, market strategist at Cetera Financial Group.
Meanwhile, the pace of growth in the U.S. manufacturing sector came in slightly below expectations, but still rose to its highest level since June, according to the Institute for Supply Management. And construction spending logged its fifth consecutive monthly gain in December, according to the Commerce Department.
“Overall, the economy started the year on a positive note and the jobs report on Friday will provide further evidence that the trend is moving forward,” said Gayle. “And with valuation at current levels, the equity market is looking more attractive, compared to treasury yields below 2 percent.”
Meanwhile, China's factory sector expanded in January, supporting hopes the world's second-biggest economy will avoid a hard landing.
European shares closed at six-month highs, after news that Germany's manufacturing sector grew in January. And Greek Finance Minister Evangelos Venizelos said talks between Greece and its private creditors are only hours away from a deal.
Among banks, Citigroup rallied after Wells Fargo boosted its rating on the bank to "outperform" from "market perform." Rivals including Goldman Sachs and Morgan Stanley also traded higher.
Facebook is expected to file paperwork with regulators on for a $5 billion IPO, with Morgan Stanley the lead of its five underwriters. Goldman Sachs, Bank of America, Barclays Capital and JPMorgan Chase are among other the other underwriters on the deal. The company is currently looking at a valuation of $75 billion to $100 billion, which would be one of the largest IPOs in U.S. history.
Among earnings, Amazon.com plunged to lead the S&P 500 laggards after the online retailer reported a sharp drop in revenue and also handed in a disappointing outlook. In addition, at least 15 brokerages slashed their price targets on the firm.
Broadcom rallied after the chipmaker posted earnings that topped expectations and handed in a revenue forecast that reassured investors. In addition, at least three brokerages raised their price targets on the company.
Whirlpool spiked more than 10 percent to lead the S&P 500 gainers after the maker of Maytag and KitchenAid appliances gave an optimistic forecast for 2012.
Aetna gained after the health insurer posted a sharply higher profitin line with estimates as its members' low use of health services helped keep claim costs down.
Meanwhile, Northrop Grumman reported earnings that topped expectations, but revenue fell short of estimates.
Qualcomm and Electronic Arts are slated to post earnings after-the-bell tonight.
Ford posted monthly auto sales that gained 7 percentin January on strong demand for small cars and SUVs. Still, the figure was slightly below expectations. Meanwhile, rival GM said its monthly sales dropped 6.1 percent, compared with an estimated 8.9 percent decline. Toyota's sales jumped 7.5 percent.
Also on the economic front, weekly mortgage applications slipped last week, even as interest rates eased, according to the Mortgage Bankers Association.
In politics, Mitt Romney won the Florida elections for the Republican candidature to the presidency, beating Newt Gingrich.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
Coming Up This Week:
THURSDAY: Jobless claims, productivity and costs, Fed's Fisher speaks, chain-store sales; Earnings from AstraZeneca, Deutsche Bank, Merck, Royal Dutch Shell, Sony, Unilever, beazer Homes
FRIDAY: Employment situation, factory orders, ISM non-mfg index; Earnings from Clorox
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