Investors sent stocks soaring Monday after getting a boost of confidence from the latest economic reports and Warren Buffett's defense of Goldman Sachs.
The Dow Jones industrial average rose 143 points for its biggest gain in two and a half months. The Dow and broader indexes all climbed more than 1 percent.
The market rebounded from a drop Friday after a string of welcome news eased some of the concerns that have been dogging investors. Economic reports signaled that consumer spending and manufacturing are strengthening.
Meanwhile, Germany's approval of bailout funds for Greece and Buffett's vote of confidence in Goldman, whose shares he owns, helped reassure investors. Goldman has been under fire the past two weeks after regulators filed civil charges accusing the bank of fraudulent dealing in mortgage-backed securities.
An agreement by United Airlines to acquire Continental Airlines Inc. in a stock deal worth about $3 billion also lifted stock prices. Investors see corporate dealmaking as a positive sign for the economy.
"The merger in the airlines is great. As you begin to see mergers that means there is value out there," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.
Traders funneled money to retail and restaurant stocks after the Commerce Department said that personal spending rose 0.6 percent in March, the biggest increase in five months. However, personal income rose just 0.3 percent. The reports were in line with analysts' expectations but showed that consumers were pulling money from savings to make purchases.
Manufacturing continued to show broad improvement. Orders have been flowing to factories for months while companies rebuild depleted inventories. The Institute for Supply Management said that U.S. manufacturing activity expanded last month at the fastest pace in nearly six years. The trade group's manufacturing index rose to 60.4 in April from 59.6 in March. Economists expected a reading of 60.
The market has swung over the past week on investor indecision about the risks that face the economy. Economic numbers and concern about government debt loads in Europe are making traders quick to jump in and out of stocks. The Dow has risen or fallen by more than 100 points in four of the past six days.
Stocks bounced higher after a disappointing end to April. The market had tumbled Friday following mixed economic reports and concerns about a possible criminal investigation of Goldman Sachs. The government reported the nation's economy grew at a slower pace in the first quarter than had been forecast and a report on consumer sentiment showed a drop in confidence in April.
The Dow rose 143.22, or 1.3 percent, to 11,151.83, its biggest point and percentage gain since Feb. 16. It was the fourth largest increase of the year.
The broader Standard & Poor's 500 index rose 15.57, or 1.3 percent, to 1,202.26, and the Nasdaq composite index rose 37.55, or 1.5 percent, to 2,498.74.
Bond prices fell after demand for safety holdings eased. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.66 percent late Friday.
The dollar rose, while gold climbed.
Crude oil rose 4 cents to $86.19 per barrel on the New York Mercantile Exchange. Traders watched developments of the Gulf oil spill. There are concerns that the fallout from the April 20 accident could disrupt supplies and refining capacity. That would drive the price of oil higher and could hurt the economy.
European markets were volatile after the European Union and the International Monetary Fund agreed to provide Greece with $145 billion over the next three years to help it with its ongoing debt problems. European shares fell but closed higher after U.S. stocks rose.
Some investors are still skittish about Greece's ability to get its debt problems under control and the potential for other European nations to face similar issues. The euro fell against the dollar.
Shares of Goldman Sachs rose $4.30, or 3 percent, to $149.50 after Buffett said over the weekend that he doesn't think the investment bank committed fraud. The SEC has accused the company of fraud in a deal involving mortgage securities deals it set up. Goldman has denied wrongdoing.
"It is significant that Buffett came out pretty strongly in favor of Goldman Sachs," said John Apruzzese, partner and equity portfolio manager at Evercore Wealth Management in New York. He said some observers will dismiss the defense because Buffett owns shares in Goldman. Still, Buffett is a powerful voice for investors.
"Given his reputation, I think that was helpful," Apruzzese said.
United parent UAL Corp. rose 51 cents, or 2.4 percent, to $22.11, while Continental climbed 51 cents, or 2.3 percent, to $22.86.
Ford Motor Co. rose 28 cents, or 2.2 percent, to $13.30 after posting a 25 percent increase in its April sales.
Macy's Inc. rose 54 cents, or 2.3 percent, to $23.74 following the consumer spending report. McDonald's Corp. rose 83 cents, or 1.2 percent, to $71.42.
Apple Inc. rose $5.26, or 2 percent, to $266.35 after the company said it sold 1 million of its iPad tablet computers in the month since it introduced the product.
About three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.2 billion shares compared with 1.6 billion Friday.
The Russell 2000 index of smaller companies rose 16.22, or 2.3 percent, to 732.82.
Germany's DAX index rose 0.5 percent, and France's CAC-40 rose 0.3 percent. Britain's FTSE 100 was closed for a bank holiday. Markets in Japan were closed for a holiday.
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