FEBRUARY 28, 2011, 8:27 P.M. ET.

Dow's Rise Puts It Up 2.81% for February

By DONNA KARDOS YESALAVICH

NEW YORK—U.S. stocks rose, in the final day of their third-straight month in the black, as investors were relieved by a pause in oil prices from their recent rally and comments from a top Federal Reserve official.

The Dow Jones Industrial Average rose 95.89 points, or 0.79%, to 12226.34, led by a 3% climb in Johnson & Johnson. Also boosting the measure, Verizon Communications posted a 2.6% gain, Hewlett-Packard added 2.2%, and 3M climbed 2.2%.

Donna Kardos Yesalavich explains why stocks ended higher, helping the S&P 500 post its best February performance since 1998.
.The Nasdaq Composite edged up 1.22, or 0.04%, to 2782.27. The Standard & Poor's 500-stock index added 7.34, or 0.56%, to 1327.22.

The Dow ended the month with a 2.81% gain, while the Nasdaq Composite gained 3.04% in February and the S&P 500 added 3.2%, representing the measures' third-straight month in the black. For the Dow and the S&P 500, this month also represented their biggest February gains since 1998.

The February climb despite the unrest in the Middle East reflect that "so far in the terms of the impact on the economy of both the U.S. and the rest of the world, the effect is fairly muted," said Jim Meyer, chief investment officer at Tower Bridge Advisors. "You've got a 10% increase in the price of oil ... but you can't really go beyond that" in terms of seeing a clear impact on the economy from the overseas turmoil, he added.

Monday's advance came as crude-oil futures pulled back from their recent highs, as oil producers Saudi Arabia and Kuwait appeared ready to make up for crude supplies lost due to unrest in Libya. Investors were relieved to see the oil futures below last week's highs of around $100 a barrel. Investors have been fretting about how consumer spending and business spending might be impacted by higher energy costs.

Stocks rallying into the month's end, aid by a slightly weaker oil market and several well-received economic reports. Donna Kardos Yesalavich, Jerry DiColo and Paul Vigna report.

Investors were also heartened by comments from Federal Reserve Bank of New York President William Dudley, who said that although rising commodity prices argue for increased inflation vigilance, the economy is unlikely to mount strong enough growth to change the path of monetary policy over coming months.


Barring a sustained period of economic growth so strong that the economy's substantial excess slack is quickly exhausted or a noteworthy rise in inflation expectations, the outlook implies that short-term interest rates are likely to remain unusually low for an extended period," he said in a speech that was upbeat about the economy's prospects.

The comments indicate that the Fed "really wants to show the market we are behind it 100%, and we are not going to leave until we are absolutely sure that we have a solid economic recovery in which to build jobs," said Jamie Cox, managing partner at Harris Financial Group.

Monday's round of economic data came in mixed. The Institute for Supply Management-Chicago's business barometer showed U.S. economic activity accelerated in February to its highest reading in 22½ years. However, its employment index pulled back in February.

Pending-home sales fell, but the decline was slightly smaller than feared. And consumer spending rose less than expected last month even as personal income rose 1%, the largest gain since May 2009, boosted by income-tax cuts from the federal government.

Investors chose to focus on the brighter spots in the data as they looked for buying opportunities after the Dow last week had its biggest weekly point drop since August.

"The last couple of months, the mentality in the market has become a buy-the-dip mentality as confidence in the economy has come back," said Gary Flam, portfolio manager at Bel Air Investment Advisors.

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Reuters

Investors found positive news Monday.
.Among Monday's stocks in focus, Berkshire Hathaway's Class A shares climbed 2.9%, while its Class B shares jumped 2.8% after Chairman Warren Buffett said in his widely followed annual letter to shareholders that he is prepared for "more major acquisitions." The conglomerate reported a 61% jump in 2010 earnings and a growing cash hoard.

Nationwide Health Properties jumped 9.7% after Ventas agreed to acquire the company in an all-stock deal valued at $5.79 billion, creating a large health-care real estate investment trust as demand for senior housing continues to grow. Ventas slipped 3.2%.

Amazon.com shed 2.2%. UBS cut its investment rating on Amazon's shares to "neutral" from "buy," saying that while it expects the company will continue to dominate e-commerce, it is concerned about margin pressures from increased distribution costs and new distribution deals with hardware providers.

Write to Donna Kardos Yesalavich at donna.yesalavich@dowjones.com

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