Stocks rose on Monday on bets the government's stress tests on the financial sector won't force banks to raise as much capital as originally thought and housing data reinforced hopes the economic slump is easing.
Fresh data gave investors more reasons to buy some stocks after pending sales of existing homes rose unexpectedly in March, which lifted shares of home builders, including Lennar
Investors are buying into the incremental improvement story and as long as that remains, that'll be something that will prop up stock prices, said Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama.
With the final stress test results expected to be released on Thursday, investors hoped banks that do need to raise capital will be able to do so without converting the government's preferred shares into common stock, which would avoid giving the government a bigger stake in the banks.
The Dow Jones industrial average <.DJI> climbed 149.89 points, or 1.83 percent, to 8,362.30. The Standard & Poor's 500 Index <.SPX> gained 17.26 points, or 1.97 percent, to 894.78. The Nasdaq Composite Index <.IXIC> rose 24.94 points, or 1.45 percent, to 1,744.14.
The broad S&P 500 is at its highest level since early January and is less than 1 percent away from turning positive for the year. Since the March 9 bear market closing low, the index is up 32.5 percent.
With earnings season slowing down, Sprint Nextel Corp
Shares of General Motors
Separately, GM said it has a number of potential buyers for its Saturn brand and will look to secure an agreement later this year. Struggling GM is in the midst of restructuring in order to avoid bankruptcy.
The Financial Times, citing people close to the situation, reported that Bank of America Corp
Bank of America rose 5.4 percent to $9.17 while the KBW Bank index <.BKX> gained 6.2 percent.
The government has assessed 19 major U.S. financial institutions to ensure they have sufficient capital to withstand the recession. The results are anticipated to show banks must raise possibly $150 billion or more in fresh capital. The stocks of the neediest banks are likely to take a hit.
(Editing by Jan Paschal)