Fresh signs of healing in the manufacturing and banking industries are giving investors reason to try to extend a powerful July rally into a second month.
Stock opened up about 1% as gains in overseas markets feed the recent momentum on Wall Street that gave the market its best July in 20 years. World markets mostly rose as surveys in China and Europe showed manufacturing activity is improving. Investors are hoping that figures on the manufacturing industry in the U.S. released later Monday will reveal a similar trend.
Positive reports on the European banking sector added to the day's upbeat news.
Barclays said its first-half net profit increased 10% on stronger earnings from its investment banking division. Still, losses from bad loans rose as consumers in both the U.S. and Britain had trouble repaying debt.
In other signs of investors' growing confidence, safe-haven assets like Treasurys and the U.S. dollar are falling, while oil and other commodities prices are rising.
The major indicators begin the first trading day of August at their highest levels since the fall. The benchmark Standard & Poor's 500 index is just 13 points shy of the 1,000 level, a point it hasn't closed above since early November.
Stocks surged last month, reigniting a spring rally that had fizzled in June amid growing doubts that the economy was on solid footing. Stocks regained momentum as an increasing number of economic and corporate earnings reports suggested investors' bets had been well-founded.
The 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, several upbeat outlooks from companies like IntelINTC and CaterpillarCAT suggest business conditions are indeed improving.
Overseas, Hong Kong's Hang Seng index rose 1.1%, while Japan's Nikkei stock average slipped 0.04%. In afternoon trading, Britain's FTSE 100 rose 1.6%, Germany's DAX index rose 1.7%, and France's CAC-40 was up 1.5%.
Among the earnings news in the U.S., health insurer HumanaHUM said its second-quarter profit rose 34% on higher premiums. Tyson FoodsTSN, said its quarterly profit soared on solid chicken sales.
Later in the day, following the close of trading, reports from homebuilders Centex CTX and Pulte HomesPHM will be closely watched. The battered housing sector has shown some recent signs of healing.
Despite the recent gains in stocks, there are still potential pitfalls to the market's optimism, namely the closely-watched monthly employment report on Friday.
There is also concern that rising commodity prices and interest rates could outpace the economy's recovery.
On Monday, safe-haven assets like the dollar and government bonds dropped sharply. The dollar was lower against other major currencies, including the Japanese yen and the British pound. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 3.56% from 3.48% late Friday.
Meanwhile, oil and other commodities prices rose. Commodities traders were heartened by news that manufacturing in China and Europe is expanding, a sign of support for industrial materials like copper.
Economists expect a measure of U.S. manufacturing activity to show the sector declined in July at the slowest pace since last August as industrial companies ramped up production to help their customers restock bare shelves.
Analysts polled by Thomson Reuters expect the index from the Institute for Supply Management, a trade group of purchasing executives, to read 46.2 compared with 44.8 in June. If accurate, it would still be the 18th consecutive month of deterioration in manufacturing.
Light, sweet crude gained $1.78 to $71.23 a barrel in electronic trading on the New York Mercantile Exchange.