updated 6/8/2004 7:59:19 AM ET 2004-06-08T11:59:19

Optimistic investors bid stock prices sharply higher in light trading Monday, lifting the Dow Jones industrial average to its highest close in over a month, buoyed by the strength of the economy and even ignoring a slight rise in oil prices.

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Much of Wall Street’s good will was carried over from Friday, when a strong employment report boosted investor confidence. But some analysts, noting that the light volume from last week also continued into Monday, wondered how sustainable the rally was.

“The market seems to be going up because there aren’t any sellers around, not because there’s a lot of demand. That has a chance to end badly,” said Richard Dickson, senior market strategist, at Lowry’s Research Reports. “Overseas markets are up strongly and oil’s down, and I think what we’re seeing is a little bit of a Pavlovian response to that more than anything else.”

Investors were also cheered by a $4.85 billion proposed merger in the casino industry. With mergers and acquisitions gaining popularity, investors saw the trend as a sign of a stable, healthy economy.

The Dow rallied 148.26 points, or 1.5 percent, and closed at 10,391.08, while the broader Standard & Poor’s 500-stock index was up 17.92 points, or 1.6 percent, at 1,140.42. The tech-rich Nasdaq composite index rose 42.00 points, or 2.1 percent, to 2,020.62.

The gains marked an important transition from May’s heavy sell-off. The Dow index and Nasdaq had their best close since April 27, and the S&P 500 last closed above 1,040 on April 23.

The start of trading on the New York Stock Exchange, the Nasdaq Stock Market and the American Stock Exchange was delayed two minutes in a tribute to former President Reagan, who died Saturday. Most U.S. financials markets will be closed Friday for the national day of mourning.

The Labor Department said Monday it plans to report on wholesale prices for May on Thursday, a day earlier than scheduled, because the government will now be closed on Friday.

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The Producer Price Index measures prices before they hit store shelves and is one of the government’s monthly gauges to track inflation. The PPI report for May will be issued at 3 p.m. Thursday, as opposed to 8:30 a.m. Friday, said a spokesman for the Bureau of Labor Statistics.

The White House has said the federal government will be closed Friday when President Reagan’s funeral service will take place.

After remaining low for most of the day, benchmark light sweet crude oil climbed 22 cents to $38.71 in late trading on the New York Mercantile Exchange. The slight rise was largely ignored by investors who have worried about inflation in recent weeks as oil prices climbed past $42 a barrel. If oil prices can at least remain under $40 per barrel, analysts believe the market’s current upward trend may stabilize.

“We’re getting toward a crucial time for the market where we either see a surge in volume and broad-based buying, or we see profit-taking and a further decline in the markets,” said Michael Sheldon, chief market strategist at Spencer Clarke LLC. “If oil prices can keep steady and no new geopolitical problems come up, then we have a chance to break to the upside.”

MGM Mirage Inc. has made an unsolicited $4.85 billion offer to acquire Mandalay Resort Group. MGM would also assume $2.8 billion in debt in what would be the biggest casino industry acquisition in history. Mandalay surged $9.96 to $70.23, while MGM Mirage fell $1.19 to $44.84.

McDonald’s Inc. was down 25 cents at $26.61 after it announced a 7.9 percent rise in same-store sales in May due to growing market share among fast-food chains.

Wal-Mart Stores Inc. said its same-store sales were tracking at the low end of its 4 percent to 6 percent forecasts. Wal-Mart gained 91 cents to $57.50.

General Motors Corp. rose 89 cents to $47.11 after it said it would spend up to $3 billion in China over the next three years, doubling its manufacturing capacity in the world’s fastest-growing automotive market.

Advancing issues outnumbered decliners by more than 4 to 1 on the New York Stock Exchange, where volume came to 1.20 billion shares, compared with 1.12 billion on Friday. The Russell 2000 index of smaller companies rose 11.15 points, or 2 percent, to 578.90.

Overseas, Japan’s Nikkei average rose 2.8 percent. In Europe, Britain’s FTSE 100 added 0.8 percent, France’s CAC-40 climbed 0.6 percent for the session and Germany’s DAX gained 1.4 percent.

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