Stocks ended solidly higher on Wednesday after European debt fears eased and sparked a broad advance, led by banks and commodity-related shares.
Investors expect further flows into equities on speculation the economy will strengthen. About seven stocks rose for every three that fell on the New York Stock Exchange.
Sectors typically helped by rising inflation, including agricultural and energy, were strong. Seed company Monsanto Co
Banks were led by JPMorgan Chase & Co
Eric Marshall, director of research at Hodges Capital Management in Dallas, Texas, said that money leaving the bond market is slowly coming back into equities. This is really about the first time in three years we've seen outflows out of bond funds.
A healthy bond auction in Portugal drove investors into riskier assets. Investors were hopeful euro-zone finance ministers would beef up the European Union's rescue fund.
Europe has kept people from becoming more bullish than they would be otherwise, and the demand in the auction sets a positive tone going forward, said Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia.
The overseas auction fed risk appetite and contributed to a drop in U.S. Treasuries and municipal bonds.
Agricultural stocks rallied after a U.S. government report said U.S. stockpiles of corn and soybeans would be drawn down to surprisingly low levels, lifting food prices and agricultural shares.
The Dow Jones industrial average <.DJI> was up 83.48 points, or 0.72 percent, at 11,755.36. The Standard & Poor's 500 Index <.SPX> was up 11.47 points, or 0.90 percent, at 1,285.95. The Nasdaq Composite Index <.IXIC> was up 20.50 points, or 0.75 percent, at 2,737.33.
JPMorgan is expected to report its quarterly results on Friday. Intel Corp
The S&P is almost 9 percent higher since the start of December, in part on bets that earnings would be strong. While early results have suggested that optimism was justified, some analysts say it may be hard for equities to rise much further given recent gains.
Sentiment has gotten heavily bullish, and eventually that will weigh on us, said Stone, who helps oversee $105 billion at PNC. I don't think we'll get a correction, but a pullback or pause seems likely.
Also lifting banks on Wednesday was Wells Fargo, which raised the U.S. bank sector to an overweight rating, citing a decline in credit costs and positive loan growth.
The stock was the top performer on the PHLX defense sector index <.DFX>, which rose 1.8 percent.
(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)