Stocks post sharp gains on mild economic data

NEW YORK - Wall Street kicked off the third quarter with a sharp advance Monday as mild manufacturing and construction data lifted hopes about interest rates and energized investors in light pre-holiday trade.

Stocks saw a solid early start on news of a possible alliance between General Motors Corp. and Nissan Motor Co., although Dow Jones industrial GM slumped ahead of its June sales results. Meanwhile, takeover speculation at Alcoa Inc. left the aluminum maker among the Dow's biggest gainers.

A slowdown in monthly manufacturing activity and construction spending was unexpected but nonetheless reinforced views that a moderating economy would keep the Federal Reserve from raising interest rates much further, as did a drop in prices paid by producers.

But with many traders out of the office ahead of Independence Day, analysts said the light trading volume likely exaggerated stocks' gains. The stock markets closed at 1 p.m. Eastern time and will be closed on today.

''There may be some follow-through reaction on Wednesday'' to the economic reports, said Russ Koesterich, senior portfolio manager at Barclays Global Investments. However, ''with this type of volume, you can't read much into the

market's reactions.''

At the close, the Dow rose 77.80, or 0.7 percent, to 11,228.02. On Friday, the Dow fell 40 points as money managers locked in profits from its 217-point rally


Broader stock indicators also advanced. The Standard & Poor's 500 index gained 9.99, or 0.79 percent, to 1,280.19, and the Nasdaq composite index surged 18.34, or 0.84 percent, to 2,190.43.

Bonds were down, although they recouped some of their earlier losses, with the yield on the 10-year Treasury note edging up to 5.15 percent from 5.14 percent late Friday. The U.S. dollar gained on the Japanese yen; gold prices lingered near $615 per ounce.