Stock indexes gained 1 percent on Monday after Federal Reserve Chairman Ben Bernanke signaled a supportive monetary policy will stay even as the unemployment rate improves.
All 10 S&P 500 sectors were higher, with gains led by S&P technology shares, up 1.5 percent, and the S&P health care sector, also up 1.5 percent. Shares of International Business Machines, up 0.8 percent at $207.19, gave the Dow its biggest boost.
The comments come as investors try to gauge how much longer a nearly 6-month rally in stocks will go on. Bernanke's comments reinforced the view that further quantitative easing, or QE3, from the Fed may be possible. The S&P 500 is up 25 percent since the end of September.
There is still a lot of cash on the sidelines looking for a pullback, and I suspect some people over the weekend said, 'Yeah, maybe I'll put some money in,' and then you get Ben Bernanke's comments and that stoked the fire a little bit and we're getting a rally, said Bob Doll, BlackRock's vice chairman and global chief investment officer in New York.
The Dow Jones industrial average was up 133.47 points, or 1.02 percent, at 13,214.20. The Standard & Poor's 500 Index was up 15.54 points, or 1.11 percent, at 1,412.65. The Nasdaq Composite Index was up 48.43 points, or 1.58 percent, at 3,116.35.
Bernanke said the U.S. economy needed to grow more quickly if it is to produce enough jobs to continue to bring down the unemployment rate.
Further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies, Bernanke told a gathering of the National Association for Business Economics.
The S&P index fell 0.5 percent last week, a relatively minor decline that was still the biggest weekly slide since the final week of December.
Improving sentiment about the pace of economic growth has kept investors piling into equities. The S&P 500 is near its highest point since May 2008, and the Nasdaq has risen for six straight weeks.
Also supporting the market was Germany's signaling for the first time on Monday its willingness to increase the resources available for tackling the euro-zone debt crisis.
BATS Global Markets Inc on Sunday apologized for a system failure that caused shares in its own initial public offering to erroneously trade for less than a penny on Friday and resulted in Apple Inc's shares being temporarily halted.
(Additional reporting by Angela Moon and Edward Krudy; Editing by Padraic Cassidy)