* Dow and S&P 500 post best one-day gains since Sept. 1
* Transports, retailers hit 52-week highs
* Investors react to Europe, ADP jobs and ISM data
* Dow up 2.3 pct, S&P up 2.2 pct, Nasdaq up 2.1 pct
* For up-to-the-minute market news see []
(Updates to close)
By Edward Krudy
NEW YORK, Dec 1 (Reuters) - The Dow and the S&P 500 posted
their biggest gains in three months on Wednesday as efforts to
resolve the EU's debt crisis helped push the S&P above 1,200,
an important technical level that signals the potential for
the rally to continue.
The S&P 500 moved out of its recent trading range as some
of the panic of previous days eased. Investors focused on
valuations that many analysts say are cheap, but volume was
average in a sign fund managers were not fully participating.
Economically sensitive cyclicals led a broad rally.
Aluminum producer Alcoa Inc <AA.N> rose 3.4 percent to $13.57,
while Home Depot Inc <HD.N>, whose fortunes are tied to the
U.S. consumer, jumped 4.6 percent to $31.61.
Stocks rallied as speculation grew that the European
Central Bank could step up its purchases of government debt
and a U.S. official told Reuters Washington would support
boosting an EU rescue facility via IMF funds. []
"It seems that as bad as Europe's issues are, there is a
growing sense this is not a systemic problem that is going to
bring the whole system down," said Jack Ablin, chief
investment officer at Harris Private Bank in Chicago. "Beyond
their troubles, we're seeing strong results in other parts of
the world."
The global economic recovery remained sound. U.S.
private-sector payrolls achieved their biggest gain in three
years, according to ADP data, while global manufacturing
picked up speed, boosted by China and Germany.
The U.S.-traded-stock of Banco Santander <STD.N>, the
Spanish bank in the eye of the euro storm, jumped 7.9 percent
to $10.38. U.S. investors have sold the stock relentlessly in
recent weeks, turning it into a proxy for euro-zone risk
aversion.
The Dow Jones industrial average <> gained 249.76
points, or 2.27 percent, to 11,255.78. The Standard & Poor's
500 Index <.SPX> rose 25.52 points, or 2.16 percent, to
1,206.07. The Nasdaq Composite Index <> added 51.20
points, or 2.05 percent, to 2,549.43.
Volume was moderate, with 8.29 billion shares traded on
the New York Stock Exchange, the American Stock Exchange, and
the Nasdaq, compared with an average of 8.48 billion so far
this year.
"On a day like this, I'd like to see bigger volume," said
Kenneth Polcari, managing director at Icap Corporates in New
York, an NYSE floor trader. "Then it indicates that there is
some real muscle behind it."
Polcari said traders could dominate through the end of the
year as fund managers refrained from making big bets before
year end.
Stocks extended gains after a U.S. official told Reuters
the United States would back a larger European financial
stability fund. The growing euro-zone debt crisis has sunk
stocks in recent weeks, making any step toward resolution
important to the market's sustained recovery. For details, see
[]
This was later denied by a U.S. Treasury Department
spokesman, but that had little effect on investors.
Any optimism over recent steps to rein in the euro zone's
debt problems has been short-lived. The EU/IMF rescue of
Ireland over the weekend was overshadowed by concerns about
Portugal and other countries.
The S&P 500 <.SPX> traded above its 14-day moving average
for the first time in 11 sessions, pushing through the recent
resistance point of 1,200. The Dow and the S&P 500 rose the
most on a daily percentage basis since Sept. 1, the day when
stocks began an autumn rally that drove the S&P up nearly 17
percent. At Wednesday's close, the Nasdaq scored its biggest
one-day percentage gain since Oct. 5.
For the S&P 500, a close above 1,200 means "the next stop
is 1,225 to 1,230," said Tom Alexander, head of Alexander
Trading in Savannah, Georgia.
That target area coincides with a recent two-year high and
the 61.8 percent Fibonacci retracement of the benchmark's
slide from October 2007 to March 2009, a key technical
indicator.
The economic optimism helped boost the Dow Jones
Transportation Average <.DJT>, which posted its second gain of
more than 2 percent in less than a week, catapulting it to its
highest level since September 2008. Wednesday's advance was
led by gains in FedEx Corp <FDX.N>, up 3.2 percent at $93.99,
and CSX Corp <CSX.N>, up 3.5 percent at $62.94.
The S&P 500 retail sector index <.RLX> rose 1.8 percent to
499.08, reflecting an optimistic outlook for the holiday
shopping season.
Advancers beat decliners on the NYSE by a ratio of 7 to 2,
while on the Nasdaq, about five stocks rose for every two that
fell.
(Reporting by Edward Krudy; Editing by Jan Paschal)
