By Leslie Josephs And Lisa Beilfuss
U.S. stock indexes on Tuesday notched their biggest gains in almost two weeks, as investors snapped up stocks ahead of key economic data and the prospect of additional stimulus from the European Central Bank.
The Dow Jones Industrial Average gained 168 points, or 1%, to 17888. The S&P 500 rose 1.1%, while the Nasdaq Composite Index added 0.9%.
The rebound follows Monday's modest retreat. Major U.S. indexes have stuck to a narrow range in recent weeks ahead of meetings of the ECB this week and the Federal Reserve later in December. Friday's U.S. payrolls data could offer further clues on the Fed's course.
While the ECB is expected to further ease policy this week, the U.S. Federal Reserve is widely expected to raise interest rates for the first time in nearly a decade.
"The big thing this week is going to be Friday's jobs data," said Kent Engelke, chief economic strategist at Capitol Securities Management.
The S&P's indexes of materials and industrial stocks posted more modest gains behind the broader market Tuesday, gaining 0.7% and 0.6%, respectively, after a key gauge of U.S. manufacturing showed that activity in the sector unexpectedly fell into contraction territory for the first time in three years. The Institute for Supply Management's index declined to 48.6 in November from 50.1 in October, its lowest level since 2009. Economists surveyed by The Wall Street Journal expected the index to edge up to 50.5.
Investors appeared to shrug off the data and bought stocks afterwards, analysts said.
"You have new money coming into the market," said Quincy Krosby, market strategist at Prudential Financial.
Shares of health-care companies led the market higher, a move analysts said was due to bargain hunting. The S&P's health care index fell 0.6% last month.
Shares of Boeing edged up 1.6% at $147.74 after Deutsche Bank said it expects the airplane maker to increase its dividend and buy back shares.
European stocks reversed earlier gains. The Stoxx Europe 600 fell 0.3%. For November, the pan-European index gained 2.7% as investors bet the ECB would further loosen monetary policy at its meeting on Dec. 3.
More stimulus from the ECB is likely to boost markets, although the impact may be smaller than before, according to Nick Nelson, head of global equity strategy at UBS in London.
"Investors are waiting for Thursday for more clarity from the ECB. That's the current mood of the markets," he said.
Shares also got a boost from downbeat Chinese manufacturing data, which raised concerns about the strength of the Chinese economy while lifting hopes for easier monetary policy. The Shanghai Composite Index edged up 0.3%.
Japan's Nikkei Stock Average gained 1.3% to close above the 20,000 mark for the first time since August. Hong Kong's Hang Seng Index rose 1.8%, while Australia's S&P/ASX 200 climbed 1.9% after its central bank kept rates on hold.
In currencies, the euro gained 0.6% against the dollar at $1.0633, while the dollar slipped 0.3% against the yen at Yen122.836.
In commodities, U.S. crude oil rose 0.3% to $41.74 a barrel, while gold added 0.2% to $1,067.80 a troy ounce.
Banking shares rose in Europe after The Bank of England said it would ease pressure on U.K. banks to hold more capital. Shares in Lloyds Banking Group climbed 2.4%, Barclays rose 4.6%, and Royal Bank of Scotland Group gained 2.7%.
Looking ahead, investors are waiting for comments from Fed Chairwoman Janet Yellen, who is slated to speak Wednesday and Thursday, and the U.S. jobs report on Friday, which is expected to show 205,000 jobs were added last month.
On Tuesday, eurozone data confirmed a pickup in activity for the manufacturing sector--the purchasing managers index rose to 52.8 in November from 52.3 the previous month.
While the ECB is expected to further ease policy this week, the Federal Reserve is widely expected to raise interest rates for the first time in nearly a decade.
"The fact they'll be taking different routes--the ECB loosening, the Fed tightening--is a given; what markets need now is guidance on how fast they'll be traveling and how far they'll end up going," said Neil Williams, group chief economist at Hermes Investment Management.
Neanda Salvaterra contributed to this article.
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