U.S. stocks rose on Monday after U.S. factory activity grew more than forecast in October, alongside improved global manufacturing, and pending home sales increased unexpectedly.

Ford Motor Co shares jumped 8.8 percent to $7.61 after the carmaker posted a surprise quarterly profit on cost cuts, improved credit results and increased market share.

The Institute for Supply Management's manufacturing index rose to its highest reading since April 2006.

The National Association of Realtors said its pending home sales index rose to the highest level in nearly three years ahead of the expiration of a popular tax credit for first-time buyers, and the Commerce Department reported construction spending recorded its largest gain in a year.

The Dow Jones home Construction Index <.DJUSHB> rose 1.5 percent.

We needed to go north of 50 and we needed to stay there, but nothing I see in this changes my mind that it is going to be a pretty sluggish recovery, said Jay Mueller, senior portfolio manager at Wells Capital Management in Milwaukee, Wisconsin, referring to the manufacturing index, which rose to 55.7 in October.

Pending home sales got a nice bump. The homebuyers credit obviously has been a factor.

The Dow Jones industrial average <.DJI> gained 119.11 points, or 1.23 percent, to 9,831.84. The Standard & Poor's 500 Index <.SPX> added 12.48 points, or 1.20 percent, to 1,048.67. The Nasdaq Composite Index <.IXIC> rose 16.76 points, or 0.82 percent, to 2,061.87.

Crude futures rose 1.2 percent and the Reuters/Jefferies CRB commodities index <.CRB> added 0.7 percent as the economic data helped to allay fears about the pace of the rebound in global demand for commodities. The S&P materials index <.GSPM> rose 2.6 percent.

The KBW bank index <.BKX> jumped 2.5 percent despite the bankruptcy filing of CIT Group Inc , the U.S. lender to hundreds of thousands of small and medium-sized businesses.

Earlier, data showed euro zone factory activity expanded for the first time in 17 months and picked up in Britain and China, suggesting a global economic recovery is underway.

(Additional reporting by John Parry; editing by Jeffrey Benkoe)