Stocks soared Monday as investors were encouraged by economic reports out of China and the U.S. and breathed a sigh of relief that General Motors finally filed for bankruptcy protection.
"I think that the crisis mode is over. We're not at the abyss," said Nadav Baum, managing director of investments at BPU Investment Management in Pittsburgh. "Now we've just got to deal with a recession. We know how to deal with a recession," he said.
Fueling the fire, the S&P 500 broke above its 200-day moving average, 928. Once it crossed over, there was no looking back and all three major indexes shot higher.
The Dow Jones Industrial Average jumped 221.11, or 2.6 percent, to close at 8,721.44. The S&P advanced 2.6 percent and the Nasdaq shot up 3.1 percent.
This came after major indexes racked up a gain for the month of May, marking the third positive month in a row, as the momentum of the recent rally held.
"I think a lot of people feel like they missed the boat," Baum said, adding that the improvement in consumer confidence has also given investors confidence to wade back into stocks. "It's almost like the risk trade is unwinding," he said.
Big industrial manufacturers locked in the top spots on the Dow after some economic report revealed glimmers of recovery in the sector.
Alcoa was the Dow's biggest gainer, up 6.6 percent, followed by Boeing , Caterpillar , United Technologies and Dupont .
It started with a report that showed China's manufacturing sector continued to expand, albeit moderately, in May. That gave investors encouragement that China's economy is stabilizing and the worst may be over for the global economy.
That not only boosted stocks, it also fueled the rise in oil prices, which settled at $68.58 a barrel.
Here in the U.S., The Institute for Supply Management's gauge of manufacturing activity rose to 42.8 in May from 40.1 in March, and construction spending jumped 0.8 percent in April, double of March's 0.4-percent increase.
Meanwhile, personal income rose 0.5 percentin April, helped by the Obama stimulus package, though spending slipped 0.1 percent.
Another thing that helped the market today was relief that the government finally let General Motors fail.
GM filed for bankruptcy protectionthis morning as part of a plan that will see US taxpayers taking a 60 percent stake in the company.
The government is "letting markets be markets," Baum said. "They didn't say 'Hey, we're just going to postpone this again, give them more money.' No. They said, 'It's time.'"
Shares of GM gyrated wildly: They dropped below 30 cents in early trading, then surged to more than $1 amid short coveringbefore settling at 75 cents, exactly where it ended Friday.
As expected, GM is going to get booted from the Dow, as is Citigroup. They will be replaced by Cisco and Travelers, effective next Monday. GM is expected to go to the Pink Sheets tonight.
Meanwhile, a judge cleared Chrysler to sell most of its assets to Italy's Fiat, moving the automaker one step closer to exiting bankruptcy protection, possibly this week.
So, one in, one out.
On the flip side, Ford was benefiting from the turmoil in the industry and said it plans to increase production 10 percent this year to make up for slowdowns in the industry. It shares surged 6.6 percent, after gaining about 17 percent in the past two weeks.
Reflecting the hopes investors have pinned on the economic recovery, retail stocks advanced, with Macy's and JCPenney up about 15 percent. Target up over 6 percent.
Techs were up sharply, including Intel , Dell and Microsoft .
But bank stocks sat this one out: Citigroup, Bank of America , JPMorgan and Wells Fargo all finished lower.
Elsewhere, shares of Irish biotech Elan gained more than 10 percent on news that it was looking into selling a minority stake to Bristol Myers Squibb. Bristol Myers stock ticked slightly higher.
ArcelorMittal rose more than 6 percent following news that the steelmaker had reached a deal with workers in Kazakhstan for three-month pay reductions that eliminated the need for mass layoffs. The company already has laid off about 1,000 of its American workers in a move to cut costs.
MONDAY: Obama speaks on GM; Geithner in China
TUESDAY: Auto sales; pending-home sales; Earnings from Hovnanian
WEDNESDAY: Weekly mortgage applications; ADP employment report; ISM services index; factory orders; weekly crude inventories; Earnings from Toll Bros.
THURSDAY: NY Fed Pres. Dudley speaks; Chain-store sales; ECB, BOE rate decisions; weekly jobless claims; Earnings from Ciena
FRIDAY: May jobs report; consumer credit
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