Stocks rose sharply on Monday as strong economic data bolstered optimism the worst of the global recession was past, even as General Motors filed for bankruptcy and was removed from the Dow industrial index.

A report from the Institute of Supply Management (ISM) on U.S. manufacturing showed the sector contracted in May, but at a slower rate than the prior month, indicating the sector is gaining traction and could help an economic recovery.

A government report showed U.S. construction spending in April posted its biggest jump in eight months, and rose for the second consecutive month.

Also, U.S. consumer spending fell in April, despite the largest personal income increase in 11 months, government data showed, although the decline was slightly less than expected by analysts.

(ISM) was better than expected, and I would put particular emphasis on the new orders component, which broke above 50. In my view, this is more evidence that we're getting closer to the end of the recession, said Michael Darda, chief economist at MKM Partners LLC in, Greenwich, Connecticut.

This is one of the first reads we've had on the second quarter, so I think it will dominate trading today.

Basic resources and energy stocks, seen benefiting from economic growth, gained. Exxon Mobil Corp rose 2.9 percent to $71.33 as the top boost to the Dow, while Alcoa Inc added 5.5 percent to $9.72.

The Dow Jones industrial average <.DJI> jumped 195.86 points, or 2.30 percent, to 8,696.19. The Standard & Poor's 500 Index <.SPX> rose 23.09 points, or 2.51 percent, to 942.23. The Nasdaq Composite Index <.IXIC> climbed 48.39 points, or 2.73 percent, to 1,822.72.

The latest U.S. economic numbers came after China's manufacturing sector continued to expand moderately in May as new export orders improved, two surveys showed, adding to tentative signs the world's third-largest economy was stabilizing.

The positive numbers overshadowed news that General Motors Corp and Citigroup Inc will be removed from the Dow Jones Industrial Average and be replaced by Cisco Systems Inc and Travelers Cos Inc , respectively, Dow Jones Indexes said Monday.

GM filed for bankruptcy protection on Monday, forcing the 100-year-old company into a new and uncertain era of government ownership.

Cisco was the top lift to the Nasdaq, rising 4.6 percent to $19.36, while Travelers gained 4.2 percent to $42.38. GM shares rose 18.7 percent to 88 cents, and Citigroup added 0.3 percent to $3.73.

Since hitting a 12-year low in early March, the Dow has gained nearly 33 percent and the S&P 500 is up more than 39 percent.

(Reporting by Chuck Mikolajczak; additional reporting by Ryan Vlastelica; editing by Jeffrey Benkoe)