NEW YORK - U.S. stocks rallied Monday, erasing the 2010 loss for the Standard & Poor's 500 index, after consumer spending topped economists' estimates and American International Group Inc. sold an Asian unit for $35.5 billion.
AIG climbed 4.1 percent after agreeing to sell AIA Group Ltd. to Prudential PLC, Britain's biggest insurer. Millipore Corp. and OSI Pharmaceuticals Inc. surged on takeover offers. Walt Disney Co. paced gains in consumer companies after the Commerce Department said personal spending increased for a fourth straight month, while Intel Corp. helped lead technology shares higher after global chip sales rose.
"Spending was a good number," said Bruce McCain, chief investment strategist at Cleveland-based Key Private Bank. "That figure was a positive step in the direction of a sustainable economic growth, which is good for stocks."
The S&P 500 advanced 1 percent to 1,115.71, above its 2009 closing level for the first time since Jan. 21. The Dow Jones industrial average climbed 78.53 points, or 0.8 percent, to 10,403.79. More than five stocks advanced for each that fell on the New York Stock Exchange.
Stocks opened higher after the 0.5 percent increase in consumer purchases was more than anticipated, Commerce Department figures showed. Benchmark indexes extended gains after a separate report showed manufacturing grew for a seventh straight month. The Institute for Supply Management's manufacturing gauge slipped to 56.5 in February from a five-year high of 58.4 in December. Readings above 50 signal expansion.
All 12 companies in a gauge of homebuilders rose after billionaire investor Warren Buffett said the U.S. residential real estate slump will end by about 2011, predicting that's how long it will take demand for homes to catch up with the supply.
"Within a year or so, residential housing problems should largely be behind us," Buffett wrote Saturday in his annual letter to shareholders of Berkshire Hathaway Inc. "Prices will remain far below 'bubble' levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits."
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