MAY 3, 2010, 4:34 P.M. ET.

S&P Retakes 1200; Dow Up 143.22

By DONNA KARDOS YESALAVICH And KRISTINA PETERSON

Stocks bounced back with a vengeance as rising auto sales, consumer spending and manufacturing activity were seen as increasing evidence of a strengthening economy.

The Dow Jones Industrial Average closed up 143.22 points, or 1.3%, to 11151.83, wiping out 90% of its 159-point drop on Friday. Blue chips posted their biggest gain since Feb. 16 in both point and percentage terms, led by economically sensitive components Caterpillar and Boeing, which each rose 2.7%.

Reuters

A specialist trader works at the kiosk that trades Bank of America on the floor of the New York Stock Exchange May 3.
.The Standard & Poor's 500 index reclaimed the 1200 level, climbing 1.3% to 1202. The industrial sector was boosted by a report from the Institute for Supply Management showing April was the U.S. factory sector's strongest month in almost six years. The measure's consumer-discretionary rose on a Commerce Department report showing consumers cut their savings and increased spending in March.

Further lifting sentiment, Ford Motor and General Motors reported gains in sales of cars and light trucks in April that reflect continuing improvement for the auto industry after one of its toughest years ever.

The Nasdaq Composite climbed 1.5%, boosted by a 2% rise in Apple. The company said iPad sales topped one million Friday, after 28 days on the market.

The gains came as an overhang of worry about the euro zone softened after Greece agreed to a €110 billion ($146.5 billion) bailout from euro-zone countries and the International Monetary Fund in return for stringent budget cuts.

Analysts said the market seemed poised for a rebound after Friday's steep selloff.

Hot Stocks: Airline Shares Sent Skyward
0:58
Airline stocks take off after Continental Airlines and United parent UAL Corp. announce a $3.15 billion merger deal, spurring speculation of further deal-making in the industry. MarketWatch's Christopher Hinton reports.
."It appears that the Greek bailout situation is a positive, but it seems to me that the market wakes up in the morning poised to go up, barring anything to the contrary, so a little bit of good news goes a long way," said Julius Ridgway, investment advisor at Medley & Brown.

Crude-oil futures briefly topped $87 a barrel, setting an 18-month high, before closing above $86 a barrel. Oil prices were also supported by fears about the potential effect of a spill from the Deepwater Horizon oil rig in the Gulf of Mexico.

The dollar was strong too, deviating from the inverse relationship typically seen between the dollar and the price of oil. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.318, up from 81.831.

Treasury prices fell, pushing the yield on the 10-year note up to 3.70%. Gold futures rose to their highest settle since Dec. 3, 2009.

Among stocks in focus, Continental Airlines rose 2.2% and United Airlines parent UAL jumped 2.4% after the airlines confirmed an all-stock tie-up to form the world's biggest air carrier, surpassing Delta Air Lines.

Alcoa fell 2.3% as materials stocks were weighed down by the People's Bank of China's move to raise its reserve-requirement ratio. Investors fretted that China's moves to cool a growing economy could hurt companies with significant operations selling building materials and other products to China.

Write to Kristina Peterson at kristina.peterson@dowjones.com

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