Stocks rose more than 1 percent on Wednesday, extending the previous day's run on hopes the Federal Reserve would act again to boost the economy after a new batch of mostly soft economic data.
Industrial and materials stocks were the top gainers, with the S&P industrials index <.GSPI> up 1.8 percent and the materials sector <.GSPM> gaining 1.5 percent.
On the Dow, Caterpillar Inc
In the latest economic data, factory activity in the U.S. Midwest slipped to its worst level since November 2009, though the figures still pointed to growth in the sector.
In a separate report, U.S. private sector job growth slowed in August for the second straight month, with 91,000 positions added. The Labor Department's much-anticipated August nonfarm payrolls report is set to come Friday.
I don't think our growth rate is going to get us anywhere. The only difference lately is that the market takes bad news pretty well, which is a short-term bullish sign, said Joe Donohue, a money manager at Dimension trading in Red Bank, New Jersey.
The Dow Jones industrial average <.DJI> was up 120.03 points, or 1.04 percent, at 11,679.98. The Standard & Poor's 500 Index <.SPX> rose 15.18 points, or 1.25 percent, at 1,228.10. The Nasdaq Composite Index <.IXIC> put on 31.51 points, or 1.22 percent, at 2,607.62.
For the month, the S&P is down about 5 percent.
European shares rose 2.7 percent, extending gains on hopes the Fed would provide further stimulus measures. <.EU>
New orders for U.S. factory goods rose more than expected in July as demand for transportation equipment surged, pointing to some resilience in manufacturing at the start of the third quarter.
Minutes from the most recent Fed policymakers meeting, released on Tuesday, indicated several policymakers wanted more monetary easing, encouraging investors to dive back into equities.
(Additional reporting by Ryan Vlastelica; editing by Jeffrey Benkoe)