U.S. stocks rallied on Monday, lifted by positive broker comments on big banks and data showing the services sector expanded for the first time in about a year.
Financial stocks moved higher after Goldman Sachs upgraded the large-cap bank sector to attractive from neutral, saying share prices for companies in the industry didn't reflect their earnings power.
Goldman upgraded Wells Fargo & Co to buy, and the stock surged 5.6 percent to $27.76. The BKW Banks index <.BKX> advanced 2.2 percent and the S&P Financial sector <.GSPF> climbed 2.4 percent, making it the top percentage gainer among S&P sectors.
The Institute for Supply Management's non-manufacturing index rose to 50.9 in September, the first time the U.S. service sector has expanded in about a year. Any reading above 50 represents growth in the sector.
It's good to see the ISM over 50, the first time the sector has expanded since August 2008, said Linda Duessel, market strategist at Federated Investors in Pittsburgh. I would say the trend is moving up.
The Dow Jones industrial average <.DJI> gained 70.43 points, or 0.74 percent, to 9,557.95. The Standard & Poor's 500 Index <.SPX> rose 10.15 points, or 0.99 percent, to 1,035.36. The Nasdaq Composite Index <.IXIC> added 16.65 points, or 0.81 percent, to 2,064.71.
The markets posted their second straight week of losses last week, as investors questioned the strength and timing of an economic recovery.
We were set up for a positive start, given the two rough weeks we've had, Duessel said. We were oversold, and then the ISM surprised to the upside, adding to positive sentiment.
Brocade Communications Systems Inc surged 17 percent to $8.98 after the Wall Street Journal reported that the company had put itself up for sale, citing sources familiar with the matter.
Dow component Caterpillar Inc added 2.6 percent to $50.11 after Morgan Stanley raised its price target on the stock by $10 to $44, and after the company said it planned to raise prices on most of its machinery next year.
(Reporting by Ryan Vlastelica; editing by Jeffrey Benkoe)