NEW YORK – US stocks rose on Monday as a weak dollar and expectations of economic stimulus from the Federal Reserve prompted investors to pick up risker assets.
The lagging greenback set the tone early in the day after a weekend meeting of the Group of 20 stopped short of setting targets to reduce trade imbalances. The greenback slid broadly, while commodity prices climbed.
Equities and the dollar have developed a strong inverse relationship, and growing speculation the Fed will extend monetary easing at its next meeting in November has pressured the dollar while boosting equities.
In a research report, Goldman Sachs said the Federal Open Market Committee is almost certain to announce renewed monetary easing at its November 2-3 meeting.
Goldman analysts calculated the Fed may have to buy up to $4 trillion in assets to achieve desired growth and inflation targets. They forecast the Fed's second round of quantitative easing will likely be worth $2 trillion.
"The quantitative easing talk has hurt the dollar, helped the equity market and created this risk-taking environment," said Nick Kalivas, senior equity index analyst at MF Global in Chicago.
"It's creating this idea it's going to be positive for asset inflation, so equities should benefit from that. There's a reluctance to sell the market in the face of that possibility in front of that meeting ... "
The Dow Jones industrial average (.DJI) gained 71.18 points, or 0.64 percent, to 11,203.74. The Standard & Poor's 500 Index (.SPX) rose 7.20 points, or 0.61 percent, to 1,190.28. The Nasdaq Composite Index (.IXIC) climbed 17.15 points, or 0.69 percent, to 2,496.54.
Resource shares led the way higher on the back of the rising commodity prices. Freeport-McMoRan Copper and Gold Inc (FCX.N) advanced 2.8 percent to $96.62, and the S&P materials sector (.GSPM) gained 2.1 percent.
Citigroup Inc (C.N) was up 2.4 percent at $4.21 after Goldman Sachs added the stock to its "conviction buy list," saying the big bank faced limited mortgage loan repurchase risk compared with its peers.
In a light day for economic data, sales of previously owned U.S. homes rose more than expected in September, the National Association of Realtors said, helping equities extend gains.