Stocks rose moderately Monday on growing expectations that the Federal Reserve will take steps to boost the economy.
A falling dollar that contributed to a jump in commodity prices also helped push the Dow Jones industrial average up 31 points to its highest close since late April.
Traders are widely expecting the Fed to expand its program to buy bonds as a way to stimulate the economy. That would push bond yields down and, in turn, would make stocks a more attractive investment.
Bank of America Corp. and JPMorgan Chase & Co. each fell more than 1.5 percent, as the banks again faced questions into how they and other finanancial companies have handled foreclosures. The financial industry joined utilities as the only two segments of the Standard and Poor's 500 index to lose ground.
For the second time in the past week, the Dow eclipsed its highest closing level this year only to quickly pullback. It closed at 11,205.03 on April 26. The average rose 31.49, or 0.3 percent, to 11,164.05. The broader Standard and Poor's 500 index rose 2.54, or 0.2 percent, to 1,185.62, while the technology-focused Nasdaq composite index rose 11.46, or 0.5 percent, to 2,490.85.
The National Association of Realtors said sales of previously occupied homes rose 10 percent last month. However, sales remain extremely weak compared with where they were just a year ago, which is likely keeping enthusiasm over the news in check.
Shaun Ahmad, president of capital markets at mortgage investment firm RoundPoint Financial Group, said that while the sales jump was a positive sign, expectations are very low right now and "there's a significant housing overhang." Home sales won't climb back to more historical levels until a large inventory of homes can be sold, Ahmad said.
The dollar fell against other major currencies. It hit a fresh 15-year low against Japan's yen. The euro again climbed above $1.40 early in the day before sliding back slightly below that level in late trading. Gold rose 1.1 percent.
Traders expect the Fed to buy bonds to stimulate the economy. While that is expected to make stocks more appealing, it would also put more money into circulation, and investors believe, send inflation rising again. In Monday's auction of the Treasury's inflation-protection securities, commonly known as TIPS, demand was so high for the bonds that their yields turned negative _ the first time that has happened at an auction. The principal of TIPS increases with inflation and falls with deflation, so a modest gain in the inflation rate would lead to a positive return on the bonds.
"Investors now have a high expectation of inflation and are taking the double-dip recession concerns off of the table," said Jack Albin, the chief investment officer at Harris Bank.
Other economic reports could further sway trading throughout the week, culminating with the government's first estimate on third-quarter gross domestic product. The report, the broadest measure of the nation's economy, is due out Friday.
Treasury bond prices were flat. The yield on a 10-year Treasury note was unchanged at 2.56 from Friday's close.
Three stocks rose for every two that fell on the New York Stock Exchange, where consolidated volume came to 4.2 billion shares, up from Friday's extremely light 3.2 billion.