NEW YORK (CNN/Money) - U.S. stocks rose Monday, capping a two-month run as investors continue to bet the economy will shake off its stupor and rebound next year.
The Dow Jones industrial average came within 24 points of its first close above 10,000 since early September. Technology stocks also rose, with the Nasdaq composite index nailing its best finish in more than three months.
"This resiliency is something that's very impressive," Larry Wachtel, market analyst with Prudential Financial, told CNNfn's Market Call.
This run, by some definitions, marks the start of a bull market for the Dow industrials. But investors could be forgiven for not feeling wealthy; the Dow is down 15 percent from its all time-high hit early last year.
In the short term, tech stocks have fared better. The Nasdaq is up 36 percent since Sept. 21, narrowing its 2001 loss to 21.7 percent.
Money flowed into financial, industrial and retail companies Monday, the sectors most likely to profit if the economy grows again next year. Defensive drug, tobacco and utility shares fell as investors took on more risk.
But Douglas Cliggott, U.S. equity strategist at J.P. Morgan Chase, says stock prices are too expensive to justify the outlook for corporate profits.
"Hence our caution or lack of excitement about getting into the market," Cliggott told CNNfn's The Money Gang. "I think fourth-quarter earnings are going to be very low."
Still, Lowe's, the No. 2 home improvement retailer, posted better-than-expected earnings before raising financial guidance for the current quarter.
A record-setting weekend for "Harry Potter and the Sorcerer's Stone" sent shares of AOL Time Warner, which owns CNN/Money, higher. Other media stocks rose.
Investors continued to cheer developments overseas. U.S. air strikes pounded some of the last Taliban strongholds in northern Afghanistan, raising hopes for a quicker-than-expected end to war in that country.
The Dow Jones industrial average rose 109.47 points, or 1.1 percent, to 9,976.46, near its first close above 10,000 since Sept. 5. The Nasdaq composite index gained 35.84, or 1.9 percent, to 1,934.42, its best finish since Aug. 14, while the Standard & Poor's 500 gained 12.41 to 1,151.06.
More stocks rose than fell. On the New York Stock Exchange, advancing issues topped declining ones nearly 2 to 1 as 1.2 billion shares traded. Nasdaq winners beat losers by a 5-to-4 margin as 1.8 billion shares changed hands.
In other markets, Treasury securities rose after selling off sharply last week. The dollar gained against the euro and yen.
Advance continues
The Dow's biggest Monday gainers, Caterpillar (CAT: up $0.91 to $50.01, Research, Estimates) , Home Depot (HD: up $1.27 to $47.07, Research, Estimates), and American Express (AXP: up $1.07 to $34.20, Research, Estimates) helped send the blue chip index up more than 20 percent from its Sept. 21 low.
The market's latest gains came as Phillips Petroleum (P: up $1.53 to $53.35, Research, Estimates) agreed to buy Conoco (COC: up $1.68 to $25.98, Research, Estimates) for about $15.2 billion in stock in a deal that will create the nation's No. 3 oil producer.
The price of oil has tumbled near two-and-a-half-year lows amid slumping fuel demand. Worried about the slide in prices, OPEC has been unable to agree on production cuts.
Cheap oil cuts costs for consumers and businesses, who are also benefiting from low interest rates. The Federal Reserve cheapened borrowing costs for the tenth time this year earlier this month.
Homeowners in recent weeks have refinanced mortgages at record levels.
That may have helped Lowe's Cos. (LOW: up $2.75 to $43.10, Research, Estimates), the No. 2 home improvement retailer behind Home Depot. The company posted a third-quarter profit that rose above expectations and said results in the current quarter will meet or top forecasts.
AOL Time Warner (AOL: up $0.85 to $37.75, Research, Estimates) also rose. The company's Warner Bros. unit posted a big win last weekend with the release of "Harry Potter and the Sorcerer's Stone," which saw a record $93.5 million in ticket sales. Rivals Viacom (VIA: up $1.25 to $45.18, Research, Estimates) and Walt Disney (DIS: up $0.74 to $21.50, Research, Estimates) also gained.
In other gainers, Alcoa (AA: up $1.37 to $38.49, Research, Estimates) said it will cut 6,500 jobs, or nearly 5 percent of its work force, the latest company to try to lower costs by trimming payrolls.
In its war against terrorism, the United States stepped up its hunt for Osama bin Laden, the Saudi millionaire suspected of plotting the Sept. 11 attacks. The Taliban control a fast-shrinking part of Afghanistan, which has been harboring bin Laden.
"Now we have the Taliban giving up almost across the board," Chuck Kadlec, chief investment strategist at J&W Seligman, told CNNfn's Market Call.
The markets gains come despite signs of economic sluggishness. The housing market weakened last month, with the number of building permits issued tumbling to a four-year-low 1.47 million annual rate. Housing starts fell less than expected.
The unemployment rate, which rose to a five-year high of 5.4 percent in October, is expected to go higher this month.
But investors Monday fled stocks that often hold up in a slowing economy. Merck (MRK: down $0.31 to $64.59, Research, Estimates), Johnson & Johnson (JNJ: down $0.02 to $59.90, Research, Estimates), and Philip Morris (MO: down $0.08 to $48.05, Research, Estimates) all fell.
The Dow Jones utility average, home to other defensive stocks, shed 2.68 points, or 1 percent, to 288.62.
Despite data showing rising retail sales, Bruce Steinberg, chief economist at Merrill Lynch, forecasts that the worst of the recession has not passed.
"We still believe that the recession will persist through the winter, mainly because major job loss looms ahead in order to restore profit margins," Steinberg wrote in a note to clients Monday.
The week brings only three full trading sessions. The U.S. stock market is closed Thursday for Thanksgiving. On Friday, trading wraps up at 1 p.m. ET. 
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