U.S. stocks rose on Monday, with the S&P 500 on track to snap a three-day sell-off as stronger-than-expected home sales data fueled optimism about the economic recovery while a weaker dollar boosted commodity-linked stocks.

Sales of previously owned U.S. homes rose to their highest level in more than 2-1/2 years. That helped to ease concerns about the housing recovery generated last week when another report showed housing starts fell sharply in October.

Monday's data reassured investors who have fretted over the economy as unemployment rose and consumer confidence fell. Stocks rallied broadly with all 10 S&P sectors showing strong gains.

We had one bad (housing) start number and people were so willing to talk about a double dip (recession), said Jim Paulsen, chief investment officer at Wells Capital Management. The great bulk of the evidence says there's definitely been a recovery going on in housing and today certainly adds to that.

The Dow Jones industrial average <.DJI> gained 117.07 points, or 1.13 percent, to 10,435.23. The Standard & Poor's 500 Index <.SPX> added 12.95 points, or 1.19 percent, to 1,104.33. The Nasdaq Composite Index <.IXIC> rose 25.12 points, or 1.17 percent, to 2,171.16.

Among home builders, D.R. Horton rose 2.3 percent to $10.61 and MDC Holdings Inc gained 0.8 percent to $30.84 after National Association of Realtors said existing home sales rose 10.1 percent in October.

The U.S. dollar fell <.DXY> 0.7 percent against major currencies after St. Louis Federal Reserve President James Bullard said the Fed should extend its mortgage-related assets purchase program.

The comments alarmed dollar investors worried that low interest rates for an extended period would diminish returns on their assets.

The slide in the dollar helped lift commodity stocks as gold hit a record $1,170.55 an ounce and copper rose to levels not seen for 14 months, helped also by expectations of recovery.

Newmont Mining Corp rose 2.2 percent to $53.41. The Dow Jones U.S. industrial metals and mining index <.DJUSIM> added 0.6 percent.

A weaker dollar increases dollar-denominated commodity prices as local manufactures demand more dollars for their products, while also helping to boost U.S. export earnings.

News that U.S. President Barack Obama's healthcare reform plan cleared an important Senate hurdle over the weekend helped push The Morgan Stanley Healthcare Payor index <.HMO> up 3.5 percent, while the AMEX Pharmaceutical index <.DRG> was up 1 percent.

On the downside, Ciena Corp shed 8.4 percent to $12.01 after it agreed to buy the optical networking and ethernet equipment businesses of bankrupt Nortel Networks
.

(Reporting by Edward Krudy; Editing by Kenneth Barry)