Stocks Continue to Rally On Reassuring Signals

U.S. stocks extended last week's rally Monday after struggling business lender CIT Group won a reprieve from its creditors and the Conference Board's index of leading economic indicators posted its third consecutive monthly gain.

The Dow Jones industrial average rose 104.21 points, or 1.2 percent, to close at 8848.15, pushing the index of blue-chip stocks into positive territory for the year. The broader Standard & Poor's 500-stock index increased 10.75 points, or 1.1 percent, to 951.13, and the tech-heavy Nasdaq finished up 22.68 points, or 1.2 percent, at 1909.29.

Investors were cheered by reports that struggling small-business lender CIT Group persuaded its creditors to provide a rescue package including $3 billion in new loans, buying the company a little more time to resolve its broader financial problems. Retailers in particular worried that a CIT implosion could endanger the upcoming holiday season, since the firm provides financing for many retail suppliers. CIT's stock rose 78.6 percent, to $1.25.

"CIT clearly is a driving force," said William Byrne, director of trading for Conifer Securities. "You have to look at so many big positives that came out of that."

Wall Street was also encouraged by positive signals about the pace of the economy's recovery. The Conference Board, a business research group, said that seven of the 10 benchmarks in its index of leading economic indicators had increased last month. Building permits, stock prices and an indicator of the economy based on bond-market data were the top three gainers, while money supply, orders for capital investments by manufacturers and consumer expectations fell. The index is now at 100.9, and its growth over the past six months is at the highest rate since the first quarter of 2006.

Commodities futures were also up. The UBS Bloomberg Constant Maturity Commodity Index rose 13.4 percent, and commodity production companies increased 2.8 percent to lead the day's rally. Crude oil prices rose 42 cents to settle at $63.98 a barrel on the New York Mercantile Exchange.

The energy sector gained 2.4 percent as Halliburton reported a smaller decline in second-quarter profit than analysts had anticipated. The company said its earnings fell about 48 percent, to $262 million during the quarter, but it attributed the drop mainly to employee separation costs. Halliburton stock closed up 4.4 percent.

Last week marked one of the biggest gains -- more than 7 percent -- for U.S. markets since stocks hit a 12-year low in March. Strong profits from big banks such as J.P. Morgan Chase and Goldman Sachs and tech giant Intel helped boost investor confidence. Although this earnings season is still expected to be brutal, the better-than-expected results could signal better days ahead.

"I would hope to see some bit of sustainability to it," Byrne said.

Overseas, Japan's Nikkei 225 rose 0.5 percent, to 9395.32, while Hong Kong's Hang Seng index jumped 3.7 percent, to 19,502.67. In London, the FTSE increased 1.3 percent, to 4443.62.

This week, investors are also awaiting key data on existing-homes sales and new unemployment figures on Thursday.

Staff writer Binyamin Appelbaum contributed to this report.