US stocks rose on Monday in a light, holiday-shortened session, as weaker-then-expected economic data increased optimism about the interest-rate outlook and positive news about Citigroup Inc spurred gains in the banking sector.
A softer ISM manufacturing index for June and weaker May construction spending pointed to a slower economy. Analysts said that bolstered the perceptions from last week that the Federal Reserve's interest-rate hikes could be ending soon.
"It's basically people looking for the Goldilocks type economic numbers - not too strong, not too soft - and that's what we got today, and so I think there are reasons to be optimistic," said Todd Clark, director of stock trading at Nollenberger Capital Partners in San Francisco.
Shares of Citigroup climbed 1.5 percent a day after news that Citigroup's Chairman and Chief Executive Charles Prince has rejected the idea of breaking up the financial services giant, according to a report in the latest edition of the financial weekly Barron's.
Shares of Bank of America Corp gained 1.5 percent, while an S&P index of financial services stocks rose 1.1 percent. The Dow Jones industrial average shot up 77.80 points, or 0.70 percent, to end at 11,228.02. The Standard & Poor's 500 Index added 9.99 points, or 0.79 percent, to finish at 1,280.19. The Nasdaq Composite Index gained 18.34 points, or 0.84 percent, to close at 2,190.43.
The New York Stock Exchange and the Nasdaq closed at 1 pm (1700 GMT) for the July 4 Independence Day holiday. Trading will resume at regular hours on Wednesday.
Trading was light in the first session of the third quarter, with only about 765.4 million shares changing hands on the New York Stock Exchange - well below last year's daily average of 1.61 billion.
Last week, the Federal Reserve raised its benchmark federal funds rate on Thursday by a quarter-percentage point to a five-year high of 5.25 percent, as expected, but toned down previous warnings about inflation and the possible need for further increases.
Fed fund futures, however, are still showing a 68 percent chance of a rate hike in August. "There's still a little bit of optimism surrounding last week's disclosure by the Fed that they're going to take a wait-and-see attitude as far as hiking rates, so that provided a bit of a positive backdrop for the market," Clark said.
In the financial services sector, Citigroup's shares gained 1.5 percent, or 73 cents, to $48.97 on the NYSE, while Bank of America's stock advanced 1.5 percent, or 71 cents, to $48.81.
Citigroup and Bank of America bolstered the S&P 500, while Citigroup was among the Dow's major advancers. On the Nasdaq, shares of Summit Bancshares Inc surged 28.3 percent, or $6.01, to $27.22. The jump in the stock's price followed news on Monday that Cullen/Frost Bankers Inc, which operates the largest national bank based in Texas, said it agreed to buy Summit Bancshares.
Cullen Frost shares fell 2.8 percent, or $1.60, to $55.70 on the NYSE. Shares of Alcoa Inc, a Dow component and the world's largest aluminium producer, rose 2.3 percent, or 73 cents, to $33.09. Analysts said the company is ripe for take-over, and see Australian resource companies BHP Billiton Ltd/Plc and Rio Tinto Ltd/Plc as likely predators.
Among decliners, Wal-Mart Stores Inc slid 1.3 percent, or 60 cents, to $47.57. Wal-Mart, the world's largest retailer, estimated on Saturday that June sales rose 1.2 percent at its US stores open at least a year, the low end of its forecast. Volume was exceptionally light, with many market participants out ahead of the July 4th holiday on Tuesday.
On Nasdaq, about 764.9 million shares traded, below last year's daily average of 1.80 billion. Advancing stocks outnumbered declining ones by a ratio of about 3 to 1 on the NYSE and by 17 to 11 on Nasdaq.