OCTOBER 5, 2010, 3:41 P.M. ET.

Stocks Rally to Five-Month High

By STEVEN RUSSOLILLO

NEW YORK—Stocks rallied to a five-month high on Tuesday, boosted by encouraging services-sector data and hopes that global central banks will follow Japan's lead in stimulating economic growth.

The Dow Jones Industrial Average recently was up 192 points, or 1.8%, to 10943, its highest level since May 3. Boeing fueled the Dow's gains, rising 3.8%, while Bank of America increased 3.3% and DuPont rose 3.2%. American Express was the only Dow component in the red as investors digested the company's decision to fight the Justice Department's civil antitrust suit. Shares fell 2.1%.

The technology-heavy Nasdaq Composite rose 2.3% to 2399. The Standard & Poor's 500-share index gained 2.1% to 1161. All 10 of its sectors traded in positive territory, led by the materials, industrials and financial sectors.

Investor optimism comes ahead of some key data later this week. Dow-component Alcoa unofficially kicks off earnings season after the close on Thursday, prior to the closely watched monthly jobs report, due Friday.

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. It's not just the Bank of Japan; central banks from Brazil to South Korea to Australia are trying to tamp down their currencies, which is driving up commodities like gold and crude, as well as stocks. Anna Raff, Mike Reid and Paul Vigna discuss.
.Bruce Bittles, chief investment strategist at Robert W. Baird, said he thinks Friday's jobs report will be a "win-win" for the market. Regardless of what it says about the economic recovery, a weak report will give the Fed more firepower to engage in quantitative easing, while a strong report will signal an improving economy, he said.

"As long as the Fed is willing to print money, all these economic reports are going to be considered favorable for the markets," Mr. Bittles said. "This will last for as long as the Fed is willing to backstop the stock market."

The U.S. services sector expanded at a better-than-expected pace in September, according to the Institute for Supply Management. The ISM report is comprised mainly of comments from service-sector companies that make up the bulk of the U.S. economy, but it also includes construction and public administration.

Also boosting sentiment, the Bank of Japan unexpectedly announced it will buy more bonds and cut its key overnight call rate to a range of zero to 0.1%, with rates to remain this low until prices begin to stabilize from deflationary pressures.

"The effort of reflation is not merely coming from the U.S. and [quantitiative-easing] potential, but is also a policy that appears will be taken more widely," said Stephen Lieber, chief investment officer at Alpine Mutual Funds. "Any major stimulus in world trading nations should be regarded positively."

Meanwhile, the Reserve Bank of Australia held steady on interest rates, bucking expectations by most economists that it would boost rates.

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.Adding to recent calls for aggressive action from the Federal Reserve, Charles Evans, president of the Federal Reserve Bank of Chicago, told The Wall Street Journal that the central bank should do "much more" monetary easing to spur economic growth.

The dollar weakened against the yen after getting only a brief BOJ-related boost. Gold pushed higher to an intraday record of $1,342.60 an ounce.

The dollar dropped against the euro, which was trading recently at $1.3846, up from $1.3689 late Monday in New York. The U.S. Dollar Index, which tracks the currency against a basket of six others, fell 0.9%.

Demand for Treasurys increased, sending the yield on the 10-year note down to 2.47%. The two-year yield touched another record low. Crude-oil prices settled at $82.82, a five-month high.

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Traders work on the floor of the New York Stock Exchange on Oct. 4.
.Among stocks in focus, Mosaic's fiscal-first-quarter earnings nearly tripled, coming off a very steep drop in profit in the year-earlier period, as the fertilizer maker's revenue and margins both jumped. Shares rose 4.4%.

Women's apparel retailer Talbots cut revenue guidance for the quarter and year as President and Chief Executive Trudy Sullivan said traffic in the fiscal third quarter "has been inconsistent." Shares slid 13%.

Walgreen's same-store sales edged up 0.4% in September, contrasting with analysts' expectations for a decline, as the drugstore chain extended its four-month growth streak. Shares rose 2.7%.

Write to Steven Russolillo at steven.russolillo@dowjones.com

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