* Crude rallies as energy shares boost S&P 500
* Financial shares up after strong European bank results
* Indexes up: Dow 2 pct, S&P 2.2 pct, Nasdaq 1.8 pct
* For up-to-the-minute market news see []
(Updates to close, changes byline)
By Chuck Mikolajczak
NEW YORK, Aug 2 (Reuters) - U.S. stocks closed at their
highest level in 10 weeks on Monday and the S&P 500 pierced key
technical levels as a weaker U.S. dollar lifted the energy and
raw materials sectors.
Strong results in Europe from BNP Paribas SA <BNPP.PA> and
HSBC Plc <HSBA.L><HBC.N> added to the upbeat tone and lifted
U.S. bank stocks. JPMorgan Chase & Co <JPM.N> rose 3.4 percent
to $41.64 and the KBW Bank index <.BKX> gained 3.2 percent.
The falling greenback set off a 3 percent jump in crude
prices <CLc1>, which, coupled with BP's <BP.L><BP.N> attempt to
permanently cap its Macondo well in the Gulf of Mexico, sent
energy shares soaring. For details on the well capping see
[].
Macondo-linked companies rallied, with Transocean Ltd
<RIGN.VX><RIG.N> up 9.6 percent to $50.68. The Philadelphia
exchange oil services sector index <.OSX> climbed 4.5 percent.
"Oil service and oil companies got overdone on the downside
because of the problem in the Gulf, and now we are having a
natural reaction back up," said Carl Birkelbach, chief
executive of Birkelbach Investment Securities in Chicago.
Crude futures settled above $81 per barrel for the first
time since early May. The S&P energy sector <.GSPE> jumped 3.6
percent.
Raw materials also rose and the Reuters/Jefferies CRB
commodity index <.CRB> hit a three-month high. Dow component
and aluminum company Alcoa Inc <AA.N> advanced 4.8 percent to
$11.71.
The 90-day correlation between the CRB and S&P 500 is
currently .85, up dramatically from the 0.33 range in early
May. Many investors reason rising raw material prices bodes
well for global demand prospects.
The Dow Jones industrial average <> gained 208.44
points, or 1.99 percent, to 10,674.38. The Standard & Poor's
500 Index <.SPX> advanced 24.26 points, or 2.20 percent, to
1,125.86. The Nasdaq Composite Index <> rose 40.66 points,
or 1.80 percent, to 2,295.36.
The S&P 500 closed the session above its 200-day moving
average and the 1,121 level, the midpoint of the slide from its
historic high reached in October 2007 and the 12-year low hit
in March 2009, which has been viewed as a key resistance
level.
The benchmark has not been able to close above this 50
percent retracement since mid-May.
"The more times a level is tested, it heightens the
significance of the move when you finally do break through,"
said Richard Ross, global technical strategist at Auerbach
Grayson in New York.
The CBOE Volatility Index <.VIX> fell below its 200-day
moving average, suggesting some of the near-term fear on the
market has diminished. But options activity on VIX futures show
that traders continue to anticipate higher volatility.
Since the beginning of May, the VIX has closed below its
200-day MA only twice, both times occurring last week.
"Even though VIX futures contracts were down, they still
carry a premium to spot VIX, indicating traders expect
significantly higher volatility for the rest of 2010," said
OptionMonster analyst Chris McKhann in Chicago.
Further boosting stocks, the Institute for Supply
Management said the U.S. manufacturing sector grew at a faster
rate than expected in July. The government reported
construction spending unexpectedly rose in
June.[].
(Reporting by Chuck Mikolajczak; Additional reporting by
Rodrigo Campos and Angela Moon; Editing by Kenneth Barry)
