Stocks surge into September

NEW YORK (CNNMoney.com) -- Stocks rallied Tuesday led by strength in tech stocks like Apple and Yahoo in addition to encouraging economic reports.

The Dow Jones industrial average (up 91.12 to 13,448.86, Charts) added over 90 points, or 0.7 percent.

The broader Standard & Poor's 500 index (up 15.43 to 1,489.42, Charts) gained over 1 percent, while the tech-heavy Nasdaq composite index (up 33.88 to 2,630.24, Charts) rose for the fourth straight session, surging 1.3 percent.

All three major gauges rallied Friday after comments from Federal Reserve Chairman Ben Bernanke eased concerns about interest rates, and comments from President Bush indicated some help for consumers affected by the subprime mortgage crisis. Markets were closed Monday for Labor Day.

Stocks continued to climb after Tuesday morning's economic reports encouraged sentiment that the Federal Reserve might consider cutting interest rates at its meeting on Sept. 18.

"Weaker than expected numbers in the construction report and the ISM data may be more encouraging to people that the Fed will cut rates on the 18th," said Scott Wren, senior equity strategist at A.G. Edwards & Sons.

However, if the Fed does not ease the benchmark federal funds rate when it meets later in the month, "we may be setting ourselves up for a big disappointment," he noted.

Shares of Dow component General Motors (up $1.18 to $31.92, Charts, Fortune 500) jumped close to 4 percent after the automaker posted a surprise sales gain in August, bucking an industry trend of weak auto sales in the period.

But Ford Motor (up $0.18 to $7.99, Charts, Fortune 500) reported another large drop in sales in August. An announcement that it would offer cash incentives to boost car sales sent shares of the automaker up over 2 percent.

Toyota Motor (up $1.27 to $116.95, Charts) posted a rare drop in U.S. sales, which was weaker than forecasts. But its sales were still enough to put it ahead of Ford Motor in the month.

Chrysler Group also saw its sales decline, falling about 6 percent, while sales at Japanese rivals such as Honda Motor (up $0.57 to $33.49, Charts) and Nissan (up $0.12 to $19.22, Charts) gained.

Energy shares got a boost from higher oil prices. Shares of Exxon Mobil (up $1.50 to $87.23, Charts, Fortune 500), BP (up $0.77 to $68.13, Charts) and Chevron (up $0.97 to $88.73, Charts, Fortune 500) all gained over 1 percent.

Light, sweet crude rose $1.08 to $75.12 a barrel on the New York Mercantile Exchange.

In other news, Home Depot (down $1.95 to $36.36, Charts, Fortune 500) fell 5 percent after the home improvement retailer said it plans to buy back about 289.6 million shares for $37 each or a total of about $10.7 billion.

And fellow Dow component Merck (down $0.13 to $50.04, Charts, Fortune 500) edged lower despite a report over the weekend that its experimental cholesterol drug Cordaptive can reduce so-called bad cholesterol and increase the levels of "good" cholesterol with minimal, unwanted side effects.

Of the 30 stocks in the Dow, 24 rose and six fell.

After the closing bell, Guess (Charts) said second-quarter profit jumped, surpassing analyst expectations.

The Wall Street Journal reported that the Consumer Product Safety Commission is now investigating toymaker Mattel (up $0.34 to $21.97, Charts, Fortune 500) over the timeliness of its disclosures of safety problems with toys imported from China.

The Journal also reported Monday that Sony (up $1.29 to $49.07, Charts) is preparing a major push in the business of video-downloads, a move that would be a challenge to rival Apple (up $5.68 to $144.16, Charts, Fortune 500).

But Apple got a big boost after Piper Jaffray said the iPhone maker could beat its sales goal in the September quarter.

Also helping lift the Nasdaq was Yahoo (up $1.24 to $23.97, Charts, Fortune 500), which soared 6 percent after Bear Stearns named the stock a top pick.

And discount wireless phone service provider MetroPCS Communications (up $1.36 to $28.65, Charts) offered to buy rival Leap Wireless International (up $10.97 to $83.47, Charts) for about $5.12 billion in stock.

Market breadth was positive. On the New York Stock Exchange, winners beat out losers by more than 2 to 1 on volume of 1.4 billion shares. On the Nasdaq, advancers topped decliners by nearly 2 to 1 on volume of 1.9 billion shares.

On the economic front, the Institute of Supply Management's manufacturing index slipped to 52.9 in the latest survey, down from the 53.8 reading for July. Any reading above 50 indicates growth in the sector. Economists surveyed by Briefing.com had forecast the index would slip to 53 in the latest survey.

Meanwhile, July construction activity sank by the biggest amount in six months as spending on homes fell for a record 17th straight month.

Tuesday kicked off a big week for economic news, culminating with Friday's August jobs report.

Treasury prices fell slightly, raising the yield on the 10-year note to 4.55 percent from 4.53 percent late Friday.

The dollar was up against the euro but lower versus the yen.

COMEX gold for December delivery rose $9.60 to $691.50 an ounce.