U.S. stocks rallied more than 2 percent on Monday as bullish comments on financial sector performance from analyst Meredith Whitney lifted hopes that banks' quarterly results may be stronger than expected.
Light volumes made it easier for stocks to post such a big move, analysts said. The Dow industrials and S&P 500 had their best gains since June 1.
Whitney, who has in the past been bearish, also upgraded Goldman Sachs
In comments to CNBC television, Whitney said bank shares were in for at least a short-term gain of 15 percent and that major financials, including Bank of America Corp
Her comments offset concerns that CIT Group Inc
The Goldman Sachs upgrade kind of turned sentiment around short-term. It was enough to send the market up, said Fred Dickson, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. Basically, people are putting a little bit of money on the table ahead of ... earnings this week.
Dickson also said the gains come on the heels of four straight down weeks for the Dow and S&P 500, suggesting the market had become oversold.
The Dow Jones industrial average <.DJI> rose 185.16 points, or 2.27 percent, to end at 8,331.68. The Standard & Poor's 500 Index <.SPX> was up 21.92 points, or 2.49 percent, at 901.05. The Nasdaq Composite Index <.IXIC> was up 37.18 points, or 2.12 percent, at 1,793.21.
Stronger-than-expected first-quarter bank earnings prompted sharp gains in the sector's stocks and helped fuel a rally of as much as 40 percent in the S&P 500 from March through May.
With second-quarter results, investors will be looking for evidence or upbeat comments from companies that suggest the U.S. economy is getting better.
In news that underscored the recession's fallout, commercial lender CIT Group said late Sunday it remained in discussions with regulators on measures to improve its near-term liquidity. In addition, the Wall Street Journal reported the company had hired a law firm to explore a possible bankruptcy filing.
CIT shares fell 11.8 percent to $1.35.
Other companies expected to report results this week include General Electric
Shares of IBM, up 2.8 percent at $103.62, led the Dow higher, followed by JP Morgan, up 7.3 percent at $34.71.
Bank of America shot up 9.3 percent to $12.99.
Volume was on the light side on the New York Stock Exchange, with 1.19 billion shares changing hands, below last year's estimated daily average of 1.49 billion, while on the Nasdaq, about 1.92 billion shares traded, under last year's daily average of 2.28 billion.
We're trading on marginal news on light volume, said Brian Rauscher, director of portfolio strategy at Brown Brothers Harriman. The conviction is that everyone is straddling the fence right now.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of 5 to 1 and on the Nasdaq, by 20 to 7.
(Additional reporting by David Gaffen; Editing by Jan Paschal)