NEW YORK (CNN/Money) -
Signs of a strong holiday season and a surge in manufacturing activity propelled the market Monday to new highs for the year.
The Nasdaq composite (up 29.56 to 1989.82, Charts) gained 1.5 percent, the Dow Jones industrial average (up 116.59 to 9899.05, Charts) gained 1.2 percent, and the Standard & Poor's 500 (up 11.92 to 1070.12, Charts) index gained 1.1 percent.
The Nasdaq closed at a new more-than-22-month high, while the Dow and the S&P 500 closed at new 18-month highs.
"The market has been saying all along that the recovery is strengthening. The retail and ISM [Institute for Supply Management] news today confirms that," said Peter Cardillo, director of research at Global Partners Securities. "Now with the Thanksgiving holiday out of the way and recent fears of terrorism on the back burner again, people have come back from the weekend ready to buy again. This is probably the start of the year-end rally."
Whether that can continue Tuesday and beyond will be of some significance. December is traditionally a strong month for the market, but there is concern that after the run stocks have had this year, it may be fairly rangebound. The only economic reports expected Tuesday are truck and auto sales for November, due during trading hours.
On Wednesday, reports include the revised reading on third-quarter productivity and the ISM's November index for the services sector. The week's most market-moving report is likely Friday's monthly employment news.
Stocks had stalled for the last few weeks, as investors opted for caution the 2003 rally. The market ended last week's holiday-shortened week in the black, but the monthly result was muted. In November, the Dow fell 0.2 percent, the S&P 500 gained 0.7 percent, and the Nasdaq composite gained nearly 1.5 percent. Typically, the month is a powerhouse.
But Monday brought out the bulls again, with investors choosing to respond to the barrage of upbeat economic news after shrugging it off during most of November. Specifically, signs that the holiday shopping period will be strong seemed to confirm the economic recovery, as did a report showing a substantial rise in manufacturing activity.
The market was on a tear from the open but extended its gains after the Institute for Supply Management's index of manufacturing activity came in at 62.8 in November, a strong gain from the previous month's 57.
"Expectations were for improvements in the economic news, but the reports today have surpassed those expectations, so you have investors finding more encouragement than they did in the reports released in mid-to-late November," said John Davidson, president and CEO, PartnersRe Asset Management.
In addition to the ISM report for the United States, Davidson said a Reuters manufacturing survey for Europe showed improvement, giving investors a sense that the manufacturing recovery is occurring on a global level. Combined with the signs of a strong holiday sales season, this provided the incentive for the market rally.
Market breadth was strongly positive. On the New York Stock Exchange, advancers beat decliners by more than 12 to five as 1.34 billion shares traded. On the Nasdaq, where 1.82 billion shares changed hands, winners topped losers by nearly two to one.
On the move
Wal-Mart Stores (WMT: down $1.14 to $54.50, Research, Estimates) said its sales from "Black Friday," the day after Thanksgiving and the first big shopping day of the season, increased 6.3 percent from a year earlier, to a record $1.52 billion. The company was one of several reporting a strong start to the season. Wal-Mart's stock declined around 2 percent, but the bullish sentiment gave a boost to the broader market nonetheless.
Shares of International Paper (IP: up $1.54 to $38.75, Research, Estimates) rose 4.1 percent after Deutsche Bank Securities upgraded the stock to "buy" from "hold."
In addition, Merck (MRK: up $1.48 to $42.08, Research, Estimates) rallied 3.6 percent after the company said it has set up a research partnership with smaller rival Neurogen (NRGN: up $4.09 to $10.47, Research, Estimates) to develop pain treatments.
Other big Dow gainers included cyclicals, such as 3M (MMM: up $2.58 to $81.62, Research, Estimates) and Alcoa (AA: up $1.12 to $33.93, Research, Estimates), both of which added more than 3 percent in response to the upbeat economic news.
Walt Disney (DIS: up $0.08 to $23.17, Research, Estimates) edged fractionally higher after the company forced vice president and board member Roy Disney to retire. Disney agreed to go, the Wall Street Journal reported, but also argued CEO Michael Eisner should step down, too. Another board member, Stanley P. Gold, also resigned, it was announced in the late afternoon, to protest Roy Disney's enforced resignation.
Aircraft maker Boeing (BA: down $0.37 to $38.02, Research, Estimates) fell just under 1 percent after Chairman and CEO Phil Condit resigned, one week after a hiring scandal caused the company's chief financial officer to be fired.
The dollar bounced off another record low versus the euro, reached overnight, but remained weaker versus the yen.
Treasury prices tumbled, pushing the 10-year note's yield up to 4.39 percent, from 4.33 percent late Friday.
NYMEX light sweet crude oil futures fell 46 cents to settle at $29.95 a barrel. COMEX gold rallied $5.80 to settle at $403.80 an ounce.