Stocks rose on Monday as investors bet that the Federal Reserve will cut benchmark lending rates this week and that soaring commodity prices will boost profits of metal and energy producers.
Wall Street widely expects the Fed to cut its fed funds rate by a quarter-percentage point to 4.5 percent on Wednesday to prevent declining house prices and tighter credit from tipping the economy into recession. Some are speculating the Fed may surprise financial markets with a half-point cut as it did in September.
Energy stocks such as Exxon Mobil stood out on a day when U.S. crude oil futures topped $93 for the first time. That and a mining takeover in Europe added to demand for commodities-related shares overall, with aluminum producer Alcoa rising 2.7 percent to $40.43.
People are anticipating Wednesday's rate cut, and there is speculation that the Fed might cut by 50 basis points. The 25-basis-point cut is pretty much baked in, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, in Cincinnati.
And the metals and the steel stocks are again defying gravity as commodities shares rise and on some overseas merger news, he added.
The Dow Jones industrial average was up 63.56 points, or 0.46 percent, to end at 13,870.26. The Standard & Poor's 500 Index was up 5.70 points, or 0.37 percent, at 1,540.98. The Nasdaq Composite Index was up 13.25 points, or 0.47 percent, at 2,817.44.
Shares of Merrill Lynch & Co Inc rose 2 percent to $67.42 on hopes the biggest U.S. brokerage wouldn't keep investors waiting too long before announcing a replacement for Stan O'Neal, who presided over the biggest quarterly loss in the firm's 93-year history.
Commodities prices rose, with the Reuters/Jeffries CRB Index gaining 1 percent. S&P materials climbed 1.2 percent. Exxon shares shot up 1.5 percent to $93.61 on the New York Stock Exchange. Chevron stock gained 1.3 percent to $92.88.
If you look at rising prices in oil, in metals, in silver, that is creating a halo effect for everything commodity-related, said Michael James, senior trader at regional investment bank Wedbush Morgan, in Los Angeles.
In earnings news, consumer electronics chain RadioShack said it swung to a quarterly profit from a loss a year ago. RadioShack's shares rose 4.1 percent to $20.42 on the NYSE.
Shares of Verizon Communications Inc rose 0.9 percent to $45.99 after the company reported a better-than-expected quarterly profit, driven by strong wireless subscriber growth.
Dell Inc's shares rose 1.7 percent to $29.47 and ranked among the Nasdaq's biggest advancers after Goldman Sachs added the computer maker's stock to its conviction buy list.
Trading was below average on the New York Stock Exchange, with about 1.22 billion shares changing hands, below last year's estimated daily average of 1.84 billion. On Nasdaq, about 2.04 billion shares traded, ahead of last year's daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of more than 3 to 2 on the NYSE. On Nasdaq, they were almost evenly matched, with 1,482 stocks rising and 1,470 declining.