NEW YORK (CNN/Money) -
Stocks surged to their highest levels in months Monday, starting off November with a bang, inspired by bullish news on the economy and the technology sector.
Gains in technology led the way, pushing the Nasdaq composite (up 35.49 to 1967.70, Charts) about 1.8 percent higher, according to preliminary reports. The Dow Jones industrial average (up 57.34 to 9858.46, Charts) gained about 0.6 percent, and the Standard & Poor's 500 (up 8.31 to 1059.02, Charts) index gained about 0.8 percent.
The Nasdaq ended the day at its best level since Jan. 17, 2002, when it closed at 1,985.87. The Dow and S&P 500 closed at their highest levels since May 31, 2002. On that day, the Dow closed at 9,925.25 and the S&P 500 closed at 1,067.14.
The S&P 500's close above 1,050 was also seen as significant, as it's a level that traders have been watching and that the index has struggled with. Having closed above it was seen as positive because it could give the index the potential to build on that and go higher, analysts said.
There are no economic reports expected Tuesday. Earnings are due before the bell from Clear Channel (CCU: up $0.58 to $41.40, Research, Estimates), Gillette (G: up $0.60 to $32.50, Research, Estimates) and Qwest (Q: up $0.03 to $3.56, Research, Estimates), among others.
Probably the most market-moving economic report of the week will be Friday's monthly employment report, which is expected to show that unemployment held steady at 6.1 percent in October, but that employers added 50,000 jobs to their payrolls.
"Most traders will really be positioning for the October employment report," Paul Mendelsohn, chief investment strategist at Windham Financial Services, wrote in a note Monday. "Economists are expecting that non-farm payrolls rose by approximately 50,000 during the month, providing evidence that with two straight months of employment growth, the jobs picture is finally turning around."
Ahead of that, investors focused on Monday's strong manufacturing report, which seemed to second Friday's solid Chicago PMI report, a regional manufacturing survey.
The Institute for Supply Management's October manufacturing index came in at 57, well above the 53.7 reading last month and higher than the 55.9 reading economists surveyed by Briefing.com had expected.
"In the very short term, you are seeing a response to the economic news, and that can give the market some buoyancy," said Subodh Kumar, chief U.S. investment strategist at CIBC World Markets. "Whereas in September and October, the above-consensus earnings enabled the market to perform better than it traditionally has, in November the focus switches to the economy."
Last week's strong first reading on gross domestic product growth in the third quarter set the standard high for economic news through the end of the year. While investors cheered the GDP's 7.2 percent growth, they also didn't use it as an incentive to take stocks much higher.
Stocks gained last week and last month during an unusually robust period, paced by much better-than-expected third-quarter earnings. So far, profits for the S&P 500 are up 21 percent from a year earlier.
Expectations for a strong fourth quarter, continued upbeat economic news and seasonal tendencies should give a lift to stocks in November, analysts say, but after the huge run year-to-date, the gains could be muted, Monday's surge notwithstanding.
"Over the next year, markets will be higher, but in November and December we may be in something of a trading range," CIBC's Kumar said. "Markets have already incorporated the improved earnings, and to an extent, the economic improvements."
Technology paces advance
Meanwhile, investors also flocked back to the technology sector and snapped up semiconductor stocks after the Semiconductor Industry Association said chip sales rose 6.5 percent in September from a year earlier, the biggest gain in about 13 years. Sales in the third quarter rose 17.5 percent from the same point a year earlier.
Intel (INTC: up $1.09 to $34.04, Research, Estimates) gained 3.3 percent and Advanced Micro Devices (AMD: up $0.73 to $15.93, Research, Estimates) gained 4.8 percent. Chip gear makers also surged, with Applied Materials (AMAT: up $1.23 to $24.56, Research, Estimates) up 5.3 percent and Applied Micro Circuits (AMCC: up $0.48 to $6.30, Research, Estimates) up 8.2 percent, among others. The Philadelphia Semiconductor (up 19.25 to 515.77, Charts) index, or the Soxx, rose 3.9 percent.
Also helping technology sentiment, Sun Microsystems (SUNW: up $0.44 to $4.39, Research, Estimates) said it was seeing signs of a pickup in technology spending in two industries key to its business, the financial services and telecom sectors. The stock rose 11 percent and topped the Nasdaq's most-actives list.
A number of multibillion-dollar mergers added to the positive sentiment last week and this trend continued Monday, albeit with smaller deals. Chipmaker Conexant Systems (CNXT: down $0.63 to $5.21, Research, Estimates) said it will buy GlobespanVirata (GSPN: down $0.04 to $6.11, Research, Estimates) for about $836 million in stock. Conexant shares fell 10.8 percent in active Nasdaq trade, while GlobespanVirata stock was little changed.
In addition, nuclear plant operator Exelon (EXC: up $1.60 to $65.05, Research, Estimates) said it will buy Illinois Power from Dynegy (DYN: up $0.16 to $4.17, Research, Estimates) for $425 million, expanding its Midwest utility business. Exelon shares rose more than 2 percent, while Dynegy shares rose 6 percent and were the NYSE's third most-active.
Market breadth was positive, with gainers beating losers by nearly eleven to five on both the New York Stock Exchange and the Nasdaq. Some 1.34 billion shares traded on the NYSE and 2.05 billion shares changed hands on the Nasdaq.
In addition to the ISM report, construction spending in September also rose more than expected, climbing 1.3 percent versus expectations for a rise of 0.4 percent. Auto and truck sales data for the month are due throughout the session. So far, both Ford (F: up $0.09 to $12.22, Research, Estimates) and General Motors (GM: up $0.23 to $42.90, Research, Estimates) have reported lower October sales, but neither saw its stock price impacted much.
The strength in stocks and the economy pushed Treasury yields higher. As of around 4:30 p.m. ET, the 10-year note was down 13/32 of a point in price, its yield rising to 4.34 percent from 4.29 percent late Friday. The dollar rose against the euro and the yen.
Among major commodities markets, NYMEX light sweet crude oil futures fell 21 cents to settle at $28.90 a barrel. COMEX gold fell $7.50 to settle at $377.10 an ounce.
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