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By Bill Rigby
NEW YORK (Reuters) - Stocks jumped to close at 18-month highs on Monday, led by industrial stalwarts International Paper Co. and Alcoa Inc., as investors welcomed a report showing U.S. factories barreled ahead in November at their fastest clip since 1983.
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The Dow and the Standard & Poor's 500 recorded their highest closes since the end of May 2002, while the Nasdaq finished at its highest mark since January 2002.
"Businesses are increasingly convinced this recovery can be sustained, and it won't just be a flash in the pan," said Richard DeKaser, chief economist at National City Corp.
The outlook for the economy was given a boost early in the session as the Institute for Supply Management said its barometer of manufacturing activity surged to 62.8 in November from 57.0 in October, far exceeding economists' forecasts and putting to rest doubts that a manufacturing recovery will be sustained.
A separate report earlier in the day showed that U.S. construction spending jumped an unexpected 0.9 percent in October, setting a record for a fourth straight month.
The Dow Jones industrial average (^DJI - news) closed up 116.59 points, or 1.19 percent, at 9,899.05, its highest close since May 31, 2002. The Standard & Poor's 500 Index (^SPX - news) ended up 11.92 points, or 1.13 percent, at 1,070.12, which marked its highest point at any time since June 3, 2002, and its highest close since May 28, 2002.
The technology-focused Nasdaq Composite Index (^IXIC - news) finished up 29.56 points, or 1.51 percent, at 1,989.82, its highest close since Jan. 15, 2002.
Trading volume was moderate on the New York Stock Exchange (news - web sites), with 1.35 billion shares changing hands, slightly below the daily average for the past month. Trading was brisker on Nasdaq, with 1.8 billion shares traded, above the daily average for the past month.
Advancing issues outpaced decliners 11 to four on the NYSE, as 628 stocks hit 52-week highs. Nasdaq gainers outpaced decliners 13 to seven, with 466 stocks hitting new 52-week highs.
Cyclical stocks, whose fortunes are most closely tied to a strengthening economy, showed the best gains with the Morgan Stanley Cyclical index (^CYC - news) rising 1.8 percent to an all-time high.
Aluminum producer Alcoa (NYSE:AA - news) jumped $1.12, or 3.4 percent, to $33.93.
Forest products company International Paper (NYSE:IP - news) led the Dow in gains, rallying $1.54, or 4.1 percent, to $38.75.
Software and computer companies Oracle Corp. (Nasdaq:ORCL - news) and Apple Computer Inc. (Nasdaq:AAPL - news) were among the Nasdaq's leaders. Oracle shares rose 49 cents or 4 percent to $12.51 and Apple shares gained 80 cents or 3.8 percent to $21.71.
Merck & Co. Inc. (NYSE:MRK - news) rose $1.48, or 3.7 percent, to $42.08 after the drugmaker, struggling to develop new blockbuster products, said it formed an alliance with Neurogen Corp. (Nasdaq:NRGN - news) to develop new pain treatments.
Wal-Mart Stores Inc. (NYSE:WMT - news) was the Dow's biggest loser, dropping $1.14, or 2 percent, to close at $54.50. The world's biggest company posted record sales on the Friday after the U.S. Thanksgiving Day holiday, but analysts focused on the 6.3 percent year-over-year sales increase coming in lower than the 14.4 percent jump of a year earlier. (With additional reporting by Denise Duclaux)
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