The S&P, considered Wall Street's most important indicator, is now up 0.4 percent for the year. The Dow jumped 214.33.
The Standard & Poor's 500 index is up for the year. And for once, it was the housing market that sent stocks soaring.
The S&P 500, considered Wall Street's most important indicator, bounded up 3.4 percent Monday and erased the last of its losses for 2009. And the Dow Jones industrials shot up more than 200 points and had their first finish above 8,400 since Jan. 13.
Two months ago, an S&P 500 in positive ground would have seemed impossible, with the stock market having fallen to 12-year lows on fears of a worsening recession. Monday's rally was led by the same financial and housing stocks that were decimated by the credit crisis and the sinking economy, and it added more momentum to a stunning rally that began March 10.
A double dose of good housing news ignited the advance: Pending U.S. home sales rose more than forecast and had their second straight monthly gain, while construction spending rose unexpectedly in March after five straight declines.
With Monday's gain, the S&P has soared 34.1 percent in the 39 trading days since the rally began, its steepest gain over that many days since 1933. The Dow, meanwhile, is up 28.7 percent.
Investors are betting that a stream of slowly improving data since early March mean that the economy, and Wall Street itself, have found a bottom. As they've kept buying, they've also overlooked reports, including millions of lost jobs, that point to continuing economic weakness.
Still, as dramatic as the rally has been, no one is describing the market as euphoric, and analysts are warning that Wall Street might not be able to sustain its advance. Monday's gain came on moderate trading volume, a sign that some investors are still cautious.
"The bear market may not be over," said David Kotok, chairman and chief investment officer of Cumberland Advisors. He pointed out that the real estate market is still weakening and banks are still taking losses on loans.
"We have the makings of a 'V' or the first half of a 'W,' " Kotok said, referring to the shape of the stock market's path. "The upward leg looks the same ... Only time will tell."
The S&P 500, the market barometer preferred by professional investors, is now up 0.4 percent for 2009. That matters not only for market watchers — many investments including mutual funds either mirror or are measured against the index. The Dow is still down 4 percent for the year.
The S&P 500 index rose 29.72 Monday to 907.24, its first close above 900 since Jan. 8. It had shown a gain for the year only during the first five trading days of January, before the market began a huge drop that carried the S&P 500 and the Dow to their lowest levels since 1997.
The Dow rose 214.33, or 2.6 percent, to 8,426.74.
The Nasdaq composite index rose 44.36, or 2.6 percent, to 1,763.56. The Nasdaq, with a big representation of high-tech and smaller company stocks, has run ahead of the other indexes, and is up 11.8 percent in 2009.
The rally came after the National Association of Realtors said its index of pending sales for previously occupied homes rose 3.2 percent to 84.6. That was well ahead of the 82.1 economists had been expecting and the second month of gains after the index hit a record low in January.
Separately, the Commerce Department said construction spending rose 0.3 percent, the best showing since a similar increase last September. Economists surveyed by Thomson Reuters had expected spending to drop 1.5 percent.
Jerry Webman, chief economist at Oppenheimer Funds Inc., said stocks are rallying because investors aren't fearful as they were months ago that the economy is headed for the abyss.
"There's been this fear that every six months another shoe drops and maybe there isn't a shoe in mid-air right now," he said.
The pending home sales data touched off a rally in home builder stocks. KBR Inc. rose $1.25, or 7.9 percent, to $17.15, while Lennar Corp. rose 88 cents, or 9.3 percent, to $10.34.
The market's enthusiasm will be put to several tests this week including the April employment report, one of the most closely watched economic indicators, which comes out on Friday.
Another concern for the market is the release Thursday of the results of the government's "stress tests" on the 19 largest U.S. financial companies. Some analysts have worried in recent weeks that renewed anxiety about the state of the financial system could upend the market's powerful two-month advance.
But investors set aside some worries about financial companies even as analysts predict that the tests — designed to determine which banks would need more cash if the recession worsens — will show that several banks need more capital.
The Financial Times reported Sunday that Citigroup Inc. and Bank of America Corp. are working on plans to raise more than $10 billion each as they negotiate with regulators over the findings of the stress tests.
Citigroup declined to comment, and a Bank of America spokesman called the report "completely inaccurate." Citi rose 23 cents, or 7.7 percent, to $3.20, while Bank of America jumped $1.68, or 19.3 percent, to $10.38.
Investors shrugged off word that regulators told Wells Fargo & Co. to shore up its finances after the "stress tests" showed the bank would have trouble surviving a deeper recession.
Wells Fargo is one of several banks regulators will force to have larger capital buffers to protect them against possible future losses, according to two people familiar with the matter who spoke to The Associated Press on condition of anonymity because of the sensitivity of the process. The company declined to comment.
Wells Fargo rose $4.64, or 23.7 percent, to $24.25.
In other trading, the Russell 2000 index of smaller companies rose 19.84, or 4.1 percent, to 506.82.
About five stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 6.9 billion shares compared with 5.2 billion shares traded Friday.
The economic reports and a big purchase of government debt by the Federal Reserve left bonds little changed. The yield on the benchmark 10-year Treasury note slipped to 3.16 percent from 3.17 percent late Friday.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose $1.27 to settle at $54.47 on the New York Mercantile Exchange.
Overseas, Germany's DAX rose 2.8 percent and France's CAC-40 gained 2.5 percent. Markets in Japan and London were closed for holidays.