Wall Street posted its best day in eight weeks on Wednesday as investor mood brightened after better-than-expected factory data from the United States and China.
Investors jumped on stocks across the market, with more than six shares rising for every one that fell on the New York Stock Exchange, while on the Nasdaq, nearly five stocks rose for every one that fell. The broad Russell 3000 index <.RUA> had 21 advancers for each declining stock.
Buying mostly came from momentum players and hedge funds, according to Jason Weisberg, director of institutional trading at Seaport Securities in New York. Traders said low volume helped exaggerate gains due to aggressive bidding.
They're moving the needle with force, but there's not a lot of volume behind it. There's a bunch of people trying to chase returns and this becomes a vicious game, Weisberg said.
Economically sensitive sectors like industrials and basic materials posted large gains, after the Institute for Supply Management showed U.S. factory activity grew faster than forecast. The ISM report added fuel to a global equities rally driven by strong overnight data out of China and Australia.
Heavy equipment maker Caterpillar Inc
Volume was subdued, but it was above some of the summer's weakest readings. About 8.12 billion shares changed hands on the New York Stock Exchange, the Nasdaq and the American Stock Exchange, below last year's estimated daily average of 9.65 billion.
The Dow Jones industrial average <.DJI> rose 254.75 points, or 2.54 percent, to 10,269.47. The Standard & Poor's 500 Index <.SPX> added 30.96 points, or 2.95 percent, to 1,080.29. The Nasdaq Composite Index <.IXIC> gained 62.81 points, or 2.97 percent, to 2,176.84.
The S&P closed above its 14-day moving average for the first time since August 10, which could set 1,068 as a strong short-term resistance level moving forward.
In the options market, puts outpaced calls in exchange-traded funds that track the S&P 500 index and the Nasdaq, suggesting investors are worried about the day's sharp rally.
This is typical of a big strong day like today. When markets go up, people put on hedges as they fear that they might see a pullback tomorrow, said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.
Puts outpaced calls by a ratio of 1.48 in the S&P 500 ETF
The global economic data boosted U.S. oil futures by nearly 3 percent to settle at $73.91 a barrel and lifted the energy sector. The NYSE Arca Oil stock index <.XOI> rose 4.1 percent and the PHLX oil services index <.OSX> jumped 4.8 percent.
Metals prices also advanced on the data, lifting copper to its highest level in more than four months.
Freeport-McMoRan Copper & Gold Inc
Shares of Burger King Holdings Inc
Ahead of the key payrolls data on Friday, investors shrugged off a report from ADP Employer Services showing private U.S. companies unexpectedly cut 10,000 jobs in August as well as government data indicating U.S. construction spending fell to its lowest rate in 10 years.
(Reporting by Rodrigo Campos; Additional reporting by Angela Moon; Editing by Jan Paschal)