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Stock market shows signs of improving

S&P 500 rises to hit above 1,000 for first time in 9 months

Traders work on the floor of the New York Stock Exchange.
Traders work on the floor of the New York Stock Exchange. Buyers are still in the market as the stock market improves.
Seth Wenig, Associated Press

NEW YORK — The Standard & Poor's 500 index is four digits again now that the stock market's rally has blown into August.

The widely followed stock market measure broke above 1,000 on Monday for the first time in nine months as reports on manufacturing, construction and banking sent investors more signals that the economy is gathering strength. The S&P is used as a benchmark by professional investors, and it's also the foundation for mutual funds in many individual 401(k) accounts.

Wall Street's big indexes all rose more than 1 percent, including the Dow Jones industrial average, which climbed 115 points.

The market extended its summer rally on the type of news that might have seemed unthinkable when stocks cratered to 12-year lows in early March. A trade group predicted U.S. manufacturing activity will grow next month, the government said construction spending rose in June and Ford Motor Co. said its sales rose last month for the first time in nearly two years.

"The market is beginning to smell economic recovery," said Howard Ward, portfolio manager of GAMCO Growth Fund. "It may be too early to declare victory, but we are well on our way."

The day's reports were the latest indications that the recession that began in December 2007 could be retreating. Better corporate earnings reports and economic data propelled the Dow Jones industrial average 725 points in July to its best month in nearly seven years and restarted a spring rally that had stalled in June.

On Monday, a report from the Institute for Supply Management, a trade group of purchasing executives, signaled U.S. manufacturing activity should increase next month for the first time since January 2008 as industrial companies restock shelves. Also, the Commerce Department said construction spending rose rather than fell in June as analysts had expected. The reports and rising commodity prices lifted energy and material stocks.

Reports from European banks eased concerns about the effect that the credit crisis and recession have had on the global banking system.

Despite the promising economic signs, major indexes are still down 35 percent from their peak in October 2007. But investors' confidence — or, for some, fear of missing a rally that has pulled stocks up 14 percent in only 16 days — is keeping buyers in the market.

"It would take a lot to derail the emerging optimism," said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors.

Major stock indicators pushed to fresh highs for the year. The Dow rose for the third day, advancing 114.95, or 1.3 percent, to 9,286.56.

The S&P 500 index rose 15.15, or 1.5 percent, to 1,002.63, its first move above 1,000 since Nov. 4. The index first closed above that mark in February 1998 and is up 48.2 percent since its recent low on March 9.

The Nasdaq composite index rose 30.11, or 1.5 percent, to 2,008.61, its first close above 2,000 since October.

Confident investors dumped safe-haven assets like Treasuries and the U.S. dollar. The yield on the 10-year Treasury note surged to 3.64 percent from 3.48 percent late Friday as its price fell more than a point.

The dollar fell to its lowest points since last fall against the euro, pound and other currencies.

The ISM's manufacturing report fanned hopes for a hard-hit industry. The group said manufacturing activity slowed in July at the slowest pace in nearly a year.

"We're past the worst of it on the manufacturing side, and we could even be getting back to growth by the third quarter of this year," said Jill Evans, co-portfolio manager for Alpine Dynamic Dividend Fund.

Among banks, Barclays PLC said its first-half net profit increased 10 percent. HSBC Holdings PLC reported a 57 percent drop in its first-half profit, but results were better than anticipated.

Earnings reports have shown that companies aren't losing money at the rapid pace they were last fall and earlier this year. Though there are concerns that the aggressive cost-cutting measures businesses have undertaken to boost profits are not sustainable, forecasts in recent weeks from companies such as Intel Corp. and Caterpillar Inc. suggest business conditions are improving.

Investors are keeping watch on unemployment and consumer spending, as well as rising interest rates that could imperil the economy's recovery.

In other trading, news that manufacturing in China and Europe is expanding pushed commodity prices higher. Copper prices, which have nearly doubled this year thanks in large part to unrelenting demand from China, hit a 10-month high.

Light, sweet crude soared $2.13 to settle at $71.58 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies rose 9.07, or 1.6 percent, to 565.78.

Five stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 5.7 billion shares, compared with 5.5 billion Friday.

Overseas, Britain's FTSE 100 jumped 1.6 percent, Germany's DAX index rose 1.8 percent, and France's CAC-40 rose 1.5 percent. Japan's Nikkei stock average slipped less than 0.1 percent.