The U.S. stock market rallied on speculation of a Greece bailout and a report that showed the seventh consecutive monthly expansion of manufacturing actives.

The S&P 500 Index gained 7.18 points, or 0.65 percent, to trade at 1,111.67 at 10:47 am.  The Dow Jones Industrial Average gained 61.07 points, or 0.59 percent, to trade at 10,386.33.   The Nasdaq Composite gained 1.07 percent. 

The capital goods sector is leading the market rally.  United Technologies (NYSE:UTX) is up 1.22 percent, Caterpillar (NYSE:CAT) is up 1.38 percent, and Honeywell (NYSE:HON) is up 1.17 percent.

Financial firms, especially those based in the U.K., lagged on Monday.

The ADRs of HSBC (NYSE:HBC) dropped 7.12 percent, those of Lloyds Banking Group (NYSE:LYG) dropped 6.77 percent, and those of Royal Bank of Scotland (NYSE:RBS) dropped 5.63 percent.

U.S. banks are also struggling as JPMorgan (NYSE:JPM) is down 0.95 percent and Citigroup (NYSE:C) is down 0.29 percent. 

The ADRs of National Bank of Greece (NYSE:NBG), however, is up 1.36 percent. 

U.K. banks shares struggle as HSBC reported an annual pretax profit of $7.1 billion while analysts surveyed by Reuters were expecting $11.4 billion. 

The U.S. stock market added to gains after the release of the ISM Manufacturing PMI at 10:00 am EST. Although the index grew at a slower pace than forecasts, investors cheered as the report showed continued expansion in the manufacturing sector.

Reports surfaced over the weekend that Germany and France may lead an effort to purchase up to 30 billion euros of Greek government debt.  European Union Monetary Affairs Commissioner Olli Rehn is visiting Athens amid such speculations.

However, German officials deny that they are planning a bailout, citing EU treaties that forbid such actions.

Despite the comments from German officials, the spread between the 10-year Greece debt yield and those of Germany narrowed Monday and credit default swap spreads on Greek sovereign debt tightened. 

Follow us on twitter @IBTFinance