NEW YORK (CNN/Money) -
A late buying spree propelled the Dow industrials to their highest close in more than 2-1/2 year Monday as investors expressed optimism about the slew of quarterly earnings due out this week.
The Nasdaq composite also pushed to its best finish in 2-1/2 years, while the S&P 500 hit its highest close in 22 months. Treasury bond prices fell, along with the battered dollar. Gold and oil also declined.
The 30-share Dow Jones industrial average (up 134.22 to 10702.51, Charts), the world's most widely watched stock market gauge, jumped 1.27 percent to end at its highest level since June 2001.
The Nasdaq composite (up 29.96 to 2153.83, Charts) added 1.4 percent to its highest since June 2001 while the Standard & Poor's 500 (up 13.82 to 1155.37, Charts) index gained 1.2 percent, ending at its highest level since March 2002.
"I'd say we're doing very well, all things considered," said Joseph Battipaglia, chief stock strategist at Ryan, Beck & Co. "Clearly, there is more money available out there, when even sectors that are fairly stretched, like tech and banks, are doing well today."
After the close, Texas Instruments (TXN: Research, Estimates) reported earnings of 20 cents a share excluding one-time items, a penny more than expected, on strong sales of wireless phones and electronics.
Dow component McDonald's (MCD: Research, Estimates) reported earnings of 35 cents per share, also excluding items, in line with forecasts and up from 25 cents a year earlier.
Tuesday morning brings earnings reports from Caterpillar (CAT: Research, Estimates), DuPont (DD: Research, Estimates), Lockheed Martin (LMT: Research, Estimates), Merck (MRK: Research, Estimates) and SBC Communications (SBC: Research, Estimates) before the start of trade.
For an in-depth look at the week's major earnings, click here. For a wrap up of all the latest reports, click here.
Apart from earnings news, investors will be watching the Federal Reserve's first policy-makers' meeting of the year Tuesday and Wednesday, although the central bank is not expected to change its target for a key short-term rate or its outlook on the economy.
"No one expects the Fed to raise rates, but people are interested to see what they say about the economy, particularly about employment," said Peter Cardillo, director of research at Global Partners Securities.
January consumer confidence numbers are also due Tuesday, shortly after trading begins. The reading from the Conference Board probably rose to 98.5 from 91.3 in December, according to analysts polled by Briefing.com.
About 30 percent of the S&P 500 companies are set to report their quarterly results this week. Results so far have been mostly upbeat, but stocks had shown little reaction to the good news, with many on Wall Street believing much of it was already reflected in stock prices.
But after last week's selloff, investors opted to jump back in Monday, a trend that picked up steam as the session wore on.
An upbeat report and forecast from Lexmark International (LXK: up $5.66 to $84.50, Research, Estimates) boosted that stock 7.2 percent and also gave a lift to rival Hewlett-Packard (HPQ: up $0.82 to $26.12, Research, Estimates), which gained 3.2 percent. Lexmark attributed its earnings growth to higher printer sales. Fellow Dow tech stock IBM (IBM: up $1.95 to $99.85, Research, Estimates) climbed 2 percent.
Overall, 29 out of 30 Dow components rose.
"I don't think there's a huge upside in the major indexes after the run we've seen," Battipaglia added. "But there are still good opportunities out there and through the first quarter, it just won't be quite as easy as a year ago."
Drugs and profits
Merck (MRK: up $1.42 to $47.20, Research, Estimates) rallied 3.1 percent after a bullish Barron's article that said Merck's stock could be a good buying opportunity.
Merck was not the only stock in the drug and biotech world attracting attention Monday. Schering-Plough (SGP: Research, Estimates) reported a smaller-than-expected profit after charges and said profits will fall this year. The stock fell in pre-market trading but later recovered to turn higher.
French drugmaker Sanofi-Synthelabo SA launched a $61 billion hostile bid for larger rival Aventis SA in a move to create the world's third largest pharmaceutical company. Aventis rejected the offer.
American Express (AXP: up $0.99 to $50.95, Research, Estimates) released earnings in the early afternoon Monday of 60 cents a share, a penny more than expected and up from 52 cents a year earlier. Shares rose 2 percent.
Telecom networking shares rallied after a positive Barron's article on Lucent Technologies (LU: up $0.34 to $4.45, Research, Estimates), which said the company's shares could benefit from recent improved earnings.
The stock rallied more than 7 percent and topped the NYSE's most-active list. JDS Uniphase (JDSU: up $0.39 to $5.22, Research, Estimates) gained 7.5 percent and topped the Nasdaq most-actives.
A report showing that existing home sales jumped almost 7 percent in December caused little stir in the stock market.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 6-5 as 1.43 billion shares changed hands. On the Nasdaq, advancers beat decliners by a 5-3 margin with 1.91 billion shares traded.
Treasury prices dipped. The 10-year note lost 11/32 of a point in price, its yield rising to 4.13 percent from 4.07 percent late Friday. Bond prices and yields move in opposite directions.
The dollar fell against the euro and the yen.
NYMEX light sweet crude oil futures fell 47 cents to settle at $34.47 a barrel. COMEX gold fell $1.30 to settle at $406.70 an ounce.
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