Banks and tech fuel robust gains on Wall Street

By Noel Randewich

(Reuters) - Wall Street surged on Tuesday to its highest since early January, led by financial and technology stocks after encouraging U.S. factory and construction data suggested the world's biggest economy was regaining momentum.

While manufacturing activity contracted in February, steadying new orders growth and improving inventories offered signs of stability.

Construction spending in January surged to the highest since 2007, while strong auto sales also boosted sentiment.

The data strengthened expectations the U.S. economy is gaining steam after slowing in the fourth quarter.

"What was the spin since last August? That the Chinese slowdown is going to affect the rest of the world," said Donald Selkin, chief market strategist at National Securities in New York. "Now we're seeing there's virtually no chance we're going to have a recession."

Swings in the price of oil have been tightly linked to stock prices in recent months and on Tuesday they continued their recovery from recent lows, with U.S. crude up 2 percent.

In a sign that investors are becoming more confident, the CBOE Volatility index <.VIX> fell 11.73 percent to its lowest since Dec. 31.

At 2:28 pm (1928 GMT), the Dow Jones industrial average was up 1.79 percent to 16,811.35 and the S&P 500 had gained 1.9 percent to 1,969.01.

The Nasdaq Composite added 2.34 percent to 4,664.82.

The S&P 500 and the Dow were on track for their best one-day percentage gain since Feb. 12. The S&P has partly recovered from a steep selloff this year and on Tuesday was back above its 50-day moving average, seen as a sign of improving sentiment.

Nine of the 10 major S&P sectors were higher, led by a 2.92 percent rise in financials <.SPSY>. The sector is still the worst performer this year, down about 9 percent on uncertainty about interest rates and fears of defaults by energy companies.

Morgan Stanley and Citigroup both rose more than 5 percent.

The technology sector <.SPLRCT> rose 2.69 percent. Apple was up 3.80 percent at $100.36, giving the biggest boost to the S&P and the Nasdaq.

Fiat rose 7.3 percent, Ford added 4.4 percent and GM 1.82 percent after strong U.S. auto sales in February defied fears of a slowdown after a record 2015.

Advancing issues outnumbered decliners on the NYSE by 2,420 to 637. On the Nasdaq, 2,006 issues rose and 750 fell.

The S&P 500 index showed eight new 52-week highs and no new lows, while the Nasdaq recorded 33 new highs and 45 new lows.

(Additional reporting by Abhiram Nandakumar in Bengaluru; Editing by James Dalgleish)