NEW YORK (CNN/Money) -
U.S. stocks rallied Monday as investors responded to the positive in the morning's economic news and showed an eagerness to nab some bargains after essentially six weeks of selling.
The Nasdaq composite (up 27.98 to 2057.80, Charts) gained about 1.4 percent, the Standard & Poor's 500 (up 11.03 to 1155.97, Charts) index gained about 1 percent, while the Dow Jones industrial average (up 94.22 to 10678.14, Charts) gained 0.9 percent.
"We've had a 7.5 percent correction in the Nasdaq and something more modest in the Dow and S&P 500 over the last six weeks, so you've got a little bounce right now," said Joseph Battipaglia, chief stock strategist at Ryan, Beck & Co.
"Conditions continue to be supportive for stocks, with interest rates likely to remain low and the economy in the 30th month of a recovery," he added. "But it's becoming harder to determine where to allocate money now. My sense is that the most economically sensitive sectors are the best bet."
The Nasdaq has closed lower for six weeks in a row, while the Dow industrials and the S&P 500 have traded not far from unchanged during the same period. That environment made stocks more appealing Monday.
The day's economic news painted a mixed picture, but were received by market participants as mostly positive. Personal income and spending rose in January from the previous month, although only spending was in line with expectations, with income falling short.
The day's most important piece of economic news came in weaker than expected, but still clocked in near historic highs. The Institute for Supply Management's manufacturing index for February dropped to 61.4 from 63.6 in January. Economists had predicted a decline to 62. The number still showed robust, though slower growth in the sector. Any reading above 50 indicates a recovery in manufacturing.
And the ISM's employment index jumped to 56.3 from 52.9 in February, a boost that many in the stock market saw as a positive sign that the labor market is also in the midst of a recovery. The jump also gave the bulls hope ahead of Friday's monthly non-farm payroll tally.
Friday's employment numbers will be key, Battipaglia added, but even if they are strong, his view is that sideways trading is apt to persist for the next few weeks.
Unemployment is forecast to hold steady at 5.6 percent in February, while employers are expected to have added 125,000 jobs to their payrolls last month after adding 112,000 the previous month.
Ahead of that, Tuesday brings auto and truck sales for February during the session.
Investors will also be looking to Intel's (INTC: up $0.49 to $29.69, Research, Estimates) mid-quarter update after the close Thursday.
Economically-sensitive stocks were the biggest gainers on the Dow, with Alcoa (AA: up $0.93 to $38.40, Research, Estimates), Caterpillar (CAT: up $1.09 to $76.84, Research, Estimates) and Procter & Gamble (PG: up $1.35 to $103.86, Research, Estimates) leading the way. All in all, 28 of the Dow 30 gained.
Among other stocks on the move, drug developer Sepracor (SEPR: up $15.99 to $44.30, Research, Estimates) rallied 56.5 percent and was one of the Nasdaq's most-actively traded issues on news it received a conditional OK from regulators for its new insomnia treatment, pending more clinical trials. Following the news, Deutsche Bank and Morgan Stanley both upgraded the stock.
Another drug maker, Medimmune (MEDI: down $1.59 to $24.10, Research, Estimates), tumbled 6.2 percent after it warned that first quarter and 2004 earnings will miss estimates. Among the challenges the company is facing: a need to spend more on research and development, and the risk that Wyeth (WYE: up $0.14 to $39.64, Research, Estimates) may get out of a partnership with Medimmune for its FluMist nasal spray flu vaccine.
News that Sprint FON (FON: up $1.48 to $19.21, Research, Estimates) will merge its wireless unit tracking stock, Sprint PCS (PCS: up $0.51 to $9.51, Research, Estimates), back into the main issue sent both stocks higher. Sprint added 8.3 percent and Sprint PCS gained 5.7 percent, topping the NYSE's most actively-traded list. Sprint FON was upgraded by UBS and Goldman Sachs.
Technology stocks were buoyant as well. Among the gainers, Sandisk (SNDK: up $2.88 to $28.30, Research, Estimates) rallied 11 percent after ratings agency Standard & Poor's said it raised its corporate debt rating on Sandisk to reflect the company's growth in profitability, even amid business risk. The company produces flash memory cards for use in consumer electronics.
Market breadth was positive. On the NYSE, where 1.44 billion shares changed hands, advancing issues outnumbered decliners by three to one. On the Nasdaq, gainers beat losers by two to one as 1.67 billion shares changed hands.
Treasury prices edged lower. The 10-year note lost 3/32 of a point, its yield moving up to 3.98 percent from 3.97 percent late Friday. The dollar fell versus the euro and was little changed versus the yen.
NYMEX light sweet crude oil futures gained 70 cents to settle at $36.86 a barrel. COMEX gold rallied $2.80 to settle at $399.60 an ounce.