Stocks stage late-day rally
Wall Street musters gains to close a choppy session higher, as investors show reluctance after last week's selloff.
NEW YORK (CNNMoney.com) -- Blue chips powered a broader rally Monday, with stocks ending higher after a volatile day on Wall Street that saw the Dow swing in a 180-point range.
The Dow Jones industrial average (INDU) rose 77 points, or 0.8%. The Dow had gained as much as 145 points and lost as much as 34 points earlier.
The S&P 500 (SPX) gained 7 points, or 0.7%, and the Nasdaq composite (COMP) rose 4 points, or 0.2%.
After the close, Stanley Works (SWK) said it would buy Black & Decker (BDK, Fortune 500) in a $4.5 billion all-stock deal.
Stocks rallied in the morning after a key manufacturing index spiked to its highest level in three and a-half years in October. An upbeat reading on pending home sales and Ford Motor's big profit report also added to the morning bounce, giving investors a reason to jump back into stocks after last week's selloff.
But the morning rally turned sour in the afternoon as weakness in financial, tech and transportation shares spearheaded a broader retreat. By the last hour, short-term investors used the selling as an opportunity to jump back in and scoop up a variety of shares.
Stocks slipped at the end of October, bringing Wall Street's seven-month winning streak to a halt. The S&P 500 plunged 5% between the rally high of Oct. 19 and last Friday, with only a brief respite last Friday following a stronger-than-expected third-quarter GDP report.
Prior to that 5% selloff, the S&P 500 had surged 63% off of 12-year lows hit in March.
Analyst Kenny Landgraf of Kenjol Capital Management said further volatility in the coming weeks would not be a surprise, but that stocks should manage to move higher through year end. He expects the Dow will end the year around the 10,500 mark.
Results: Ford Motor (F, Fortune 500) delivered its first quarterly profit in more than a year Monday, helped by the government's Cash for Clunkers program.
The company said it earned nearly $1 billion, or 29 cents a share. The automaker was expected to post a loss of 12 cents a share, according to Thomson Reuters estimates.
Ford shares rose 8.3% Monday.
Economy: A trio of economic reports released in the morning helped reassure investors that the recovery is on track.
A survey by the Institute for Supply Management showed nationwide manufacturing activity jumped to 55.7 in October, from 53 the previous month. Economists surveyed by Briefing.com had predicted a more modest gain to 54. Numbers above 50 signal growth, while figures below 50 suggest contraction.
The Commerce Department said construction spending rose unexpectedly by 0.8%. Economists surveyed by Briefing.com were anticipating a 0.5% decline.
Meanwhile, the National Association of Realtors reported that the number of signed sales contracts to buy homes rose in September for the eighth straight month. Pending home sales rose much more than expected, by 6.1%, in September. Analysts were looking for a 1.2% increase.
CIT collapse: Small business lender CIT (CIT, Fortune 500) filed for bankruptcy protection Sunday as part of a reorganization plan that has the support of most of the company's debtholders. It was the fifth-largest in U.S. history.
CIT said it has already worked out a reorganization plan with bondholders that it expects to speed the Chapter 11 process and reduce CIT's debt by $10 billion.
But the filing knocks out common and preferred shareholders, and the stock plunged on the news, losing 65% in active trading.
Currency and commodities: The dollar gained versus the yen and the euro.
U.S. light crude oil for December delivery gained $1.13 to settle at $78.13 a barrel on the New York Mercantile Exchange after tumbling in the previous session.
COMEX gold for December delivery rose $19.10 to settle at $1,059.50 an ounce.
World markets: Global markets were mixed. European markets gained and Asian markets ended lower.
Bonds: Treasury prices slipped, raising the yield on the 10-year note to 3.41% from 3.38% Friday. Treasury prices and yields move in opposite directions.
Market breadth was mixed. On the New York Stock Exchange, winners topped losers by eight to seven on volume of 1.54 billion shares. On the Nasdaq, decliners topped advancers seven to six on volume of 2.42 billion shares. 
