Wall St advances on first day of third quarter

By Ryan Vlastelica

NEW YORK (Reuters) - U.S. stock indexes rose 1 percent on Monday, building on the strongest first half of any year since 1998 as concerns continued to ease that the Federal Reserve would soon tighten its stimulus program.

Gains in 2013 have largely been fueled by the Fed's accommodative bond-buying policy, which helped take major indexes to a series of record highs before pulling back on after comments from Fed Chairman Ben Bernanke created uncertainty over when the central bank will end the policy.

While Wall Street showed some signs of stabilization last week as comments from Fed officials assured traders the program would not be slowed imminently, the transition to a no-stimulus environment is expected to result in further volatility.

 

"Markets have been going back and forth, but it looks like a relief rally after everyone over-reacted to Bernanke's comments," said Uri Landesman, president of Platinum Partners in New York.

"That said, relief over the Fed took us from 1,560 to nearly 1,620 (on the S&P 500), which raises the question of how much higher we can go. I think 1,620 will prove to be a ceiling for a while."

Cyclical sectors, which have been highly correlated to perceptions of Fed policy, outperformed on Monday. Materials company Freeport-McMoRan Copper & Gold Inc rose 1.8 percent to $28.09 while financial bellwether JPMorgan Chase & Co added 1.4 percent to $53.52.

Overseas strength added to the positive tone. Chinese shares rose 0.8 percent after Beijing policymakers assured investors that there was ample liquidity in the system.

The Dow Jones industrial average <.DJI> was up 158.05 points, or 1.06 percent, at 15,067.65. The Standard & Poor's 500 Index was up 18.12 points, or 1.13 percent, at 1,624.40. The Nasdaq Composite Index was up 48.99 points, or 1.44 percent, at 3,452.24.

Last week, the S&P 500 rose and ended a two-week streak of losses. However, it closed down for the month of June, breaking a seven-month rally.

In the latest economic data, May construction spending rose 0.5 percent, slightly under expectations for growth of 0.6 percent. The Institute for Supply Management's index on manufacturing came in at 50.9, modestly above the 50.5 that was forecast.

Markets have had something of a paradoxical relationship with economic data recently, with positive reads sometimes leading to market declines on concerns a strong economy means the Fed will withdraw its stimulus quickly.

In corporate news, Onyx Pharmaceuticals Inc jumped 51 percent to $131.17 after the company said it was considering selling itself, though it had rejected a roughly $10 billion bid from Amgen Inc. Canaccord Genuity raised its price target on the stock to $140 from $105.

Shares of Amgen rose 2.5 percent to $101.06.

Pharmaceutical companies were among the strongest of the day. Alexion Pharmaceuticals jumped 7.1 percent to $98.59 as the top gainer on the Nasdaq 100, followed by Vertex Pharmaceuticals, up 5.6 percent to $84.36.

A number of analysts issued bearish comments on Research in Motion after the BlackBerry maker last week reported an unexpected operating loss for the quarter. Societe Generale downgraded the stock to "hold" from "buy" while at least three firms cut their price targets. U.S.-listed shares fell 2.3 percent to $10.20.

(Editing by Chizu Nomiyama)