Rebound in commodities carries stocks higher

The Dow Jones industrial average and other key U.S. stock indexes rose to nearly one-year highs Tuesday on growing optimism for the world economy and analyst upgrades of some high-profile companies.

The dollar fell to a one-year low against the euro, helping drive oil, gold and copper prices higher. The surge in commodities, in turn, sent shares of energy and raw-material producers up sharply.

The global advance in stocks began after the Asian Development Bank raised its forecast for 2009 economic growth in Asia outside of Japan to 3.9% from 3.4%. The bank cited the strength of expansions in China, India and Indonesia. The MSCI World stock index rallied 1.1%.

The Dow rose 51.01 points, or 0.5%, to 9,829.87, its highest close since Oct. 6.

After soaring 50% since hitting a 12-year low in early March, the Dow stands 170 points below the 10,000 mark -- a level the average first crossed in March 1999 and hasn’t been above since October.

The broader Standard & Poor’s 500 index gained 7.00 points, or 0.7%, to close at 1,071.66, while the Nasdaq composite index rose 8.26 points, or 0.4%, to 2,146.30.

All three U.S. gauges marked 11-month highs, as did the MSCI World index.

On the New York Stock Exchange, more than two stocks rose for every one that fell.

Financial shares in the S&P; 500 climbed 2.3%, more than any other broad industry group, as JPMorgan Chase gained 4.3% after Bank of America analysts increased their projection for the company’s third-quarter earnings.

Shares of Bank of America, meanwhile, rose 2.1% on favorable comments by Rochdale Securities analyst Richard Bove, who cited the bank’s decision to quit two federal guarantee programs.

Goldman Sachs Group rose 1.7% to its highest closing price since July 2008.

Bond insurer MBIA surged 22%.

In other analyst-inspired trading, department-store retailer Macy’s jumped 5.5% after Citigroup advised buying the stock, while Hewlett-Packard added 1.4% on an upgrade by Credit Suisse Group.

As commodity prices advanced, gold giant Newmont Mining rose 1.8%. Coal miner Peabody Energy shot up 5.3% after Citigroup upgraded the stock. Oil producer Chesapeake Energy jumped 3.6%.

U.S. Steel surged 4.6% after Bank of America analysts raised their view on the company, saying it should return to profitability in 2010.

Speculation that demand for commodities might boost industrial activity sent Caterpillar up 3.6% and General Electric up 1.5%.

Tuesday’s rally came as the Federal Reserve’s interest rate committee began a two-day meeting. The Fed is widely expected to leave its benchmark interest rate unchanged at a record low range of zero to 0.25%.

After the Fed session, leaders of the Group of 20 countries will meet in Pittsburgh on Thursday and Friday to work on a pact to prevent a repeat of the worst economic crisis since the Great Depression and to ensure a sustained recovery.

In other market highlights Tuesday:

* AMR slumped 6.5% after the parent of American Airlines said it expected to raise more than $500 million in stock and debt.

* Google rose 0.4% to $499.06, a 13-month high, after a Canaccord Adams analyst said the stock could go to $560.

* The Russell 2,000 index of smaller companies climbed 0.8% to its highest level since early October.

* Gold and silver rose after three days of drops, while oil futures gained $1.84 to settle at $71.55 a barrel on the New York Mercantile Exchange.

* Overseas, benchmark stock indexes rose 0.2% in Britain, 0.7% in Germany and 0.3% in France. The Japanese market was closed for a holiday.