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Stocks rally, nearing multi-year highs

© Brendan Mcdermid / Reuters / REUTERS

Traders work on the floor of the New York Stock Exchange.

Investors are looking for more reasons to buy stocks Monday, driving Wall Street’s major indexes higher amid optimism about the economy.

The Dow Jones industrial average was lately up over 130 points and about 40 points away from its high for the year, while the Nasdaq Composite index was close to a multi-year high, having risen for six straight weeks.

Last week, the benchmark S&P 500-stock index fell 0.5 percent. It was a relatively minor decline, but still its biggest weekly slide since the final week of December.

Rising optimism about economic growth has kept investors piling into equities so far this year, a trend that looks set to continue with the S&P 500 near its highest point since May 2008.

In fact, all three major stock market indexes are trading near their highest levels in years, leading market observers to ask if the current market rally is done, or is set to continue.

“There’s a lot of optimism in the market, and the longer-term trend is up,” said Cort Gwon, chief strategist at HudsonView Capital Management in New York. “After a quiet weekend we'll probably just feed off the past few weeks, which were largely very positive.”

Investors and market watchers are giving a number of reasons for the market’s performance Monday.

One put forward in The Wall Street Journal is that, as the debt debacle in Europe continues to fade and investors put the financial crises of recent years behind them, investors are taking on more risk instead of fixating on safe investments, such as bonds.

Indeed, Bloomberg News notes that hedge funds trailing the S&P 500-stock index over the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years.

Federal Reserve Chairman Ben Bernanke gave the market a lift in the early going, telling the National Association for Business Economics spring conference in Arlington, Va., that the U.S. labor market remains weak and suggesting that the central bank is prepared to keep interest rates near zero unless the economy improves substantially.

Investors were digesting other news about the economy Monday, including a new report that said pending U.S. home sales were down 0.5 percent in February after rising 1.9 percent in January. The report had been expected to show a 1 percent rise.

The pending home sales data are a forward-looking indicator of future home sales activity. Data on the housing market continue to be weak, with the government reporting last week that new home sales fell 1.6 percent.

Crude oil prices fell 0.1 percent, though they remained up almost 8 percent for the year on worries about supply disruptions from the Middle East. Rising prices are viewed as a headwind for the economy.

Lions Gate Entertainment Corp rallied 8.9 percent to $15.83 after the strong opening to its film "The Hunger Games," which made $214 million over the weekend globally.

BATS Global Markets Inc on Sunday apologized for a system failure that caused its own shares to erroneously trade for less than a penny on Friday and resulted in Apple Inc's shares being temporarily halted.

Chief Executive Joe Ratterman called the incident a "devastating moment," and said the company's withdrawn initial public offering was on hold "for the foreseeable future."

U.S. stocks rose in light volume on Friday, buoyed by rising energy and basic materials shares.

Reuters contributed to this report.

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