Factory report sends market up

associated pressThe Dow closed at its highest since December, 2007, after a report said U.S. manufacturing grew in April at the fastest clip in 10 months.

NEW YORK -- U.S. stocks advanced Tuesday, propelling the Dow Jones industrial average to its highest close since December, 2007, after a report indicated U.S. manufacturing expanded in April, offsetting concern about the economic recovery.

After climbing as much as 125 points, the Dow finished at 13,279.32, up 65.69 points, or 0.5 percent.

The Standard & Poor's 500 Index advanced 7.91 points to 1,405.82, its highest since April 3. The Nasdaq composite rose 4.08 points to 3,050.44.

U.S. manufacturing grew last month at the fastest pace in 10 months, according to the Institute for Supply Management, a trade group of purchasing managers. New orders, production, and a measure of hiring all rose.

The institute said its index of manufacturing activity reached 54.8 in April, the highest level since June and up from 53.4 the previous month. Readings above 50 indicate expansion.

Factories have been a key source of hiring and growth since the recession ended nearly three years ago. The sector has expanded for 33 straight months, according to the institute's index.

Factories account for only about 9 percent of total payrolls but added 13 percent of the new jobs last year. Manufacturers have added 120,000 jobs in the past three months.

The manufacturing report, which exceeded analysts' expectations, led investors to shift money out of bonds and into stocks.

The manufacturing index is closely watched, in part because it is the first major economic report for the month.

The big gain followed a series of weaker data in recent weeks that had pointed to slower hiring, increased applications for unemployment benefits, and lower factory output.

A measure of employment in the institute's survey rose to a 10-month high. This showed that factories are still hiring at a solid pace. A gauge of new orders reached its highest in a year. That could signal faster production in the coming months. Export orders also rose, which could offset worries that weaker economies in Europe and China could drag on U.S. exports.

"This survey will ease concerns that the softer tone of the incoming news in recent months marked the start of a renewed slowdown in growth," Paul Dales, an economist at Capital Economics, said in a note to clients.