S&P 500 rallies to two-month high after factory orders increase

Strong auto sales and increased factory orders helped push stock prices higher on Tuesday in an abbreviated session.

The Dow Jones Industrial Average gained 72.43 points to 12,943.82. The Nasdaq Composite Index was up 24.84 points to 2,976.08, and the S&P 500 Stock Index was up 8.51 points to 1,374.02.

The Commerce Department reported factory orders rose by 0.7 percent in May. Auto sales were also higher, led by a 20 percent increase at Chrysler Group LLC.

Commodities were active again on Tuesday. Oil was up $3.42 to $87.15 a barrel on rising tension in the Middle East. Gold added $24.10 to $1,621.80 an ounce.

Commodity, industrial and technology shares had the biggest gains among 10 groups in the S&P 500. Alcoa Inc. (NYSE: AA), Caterpillar Inc. (NYSE: CAT) and Apple Inc. (Nasdaq: AAPL) advanced at least 1.1 percent. Ford Motor Co. (NYSE: F) rallied 2.2 percent as deliveries of cars and light trucks beat analysts’ estimates. Facebook Inc. (Nasdaq: FB) climbed 1.4 percent as General Motors Co. (NYSE: GM) is said to be talking with the largest social networking company about resuming advertising.

“The factory orders report was a good surprise,” said Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co. “Investors are also finding comfort in central bank action. The Fed has anticipated that they will do whatever it takes to not let the economy slip, China is doing the same, and ... the Europeans seem to be doing that too.”

The U.S. economy will grow by 2 percent this year and about 2.25 percent in 2013 amid a “tepid” recovery and the European debt crisis, the International Monetary Fund said, lowering its previous projections. In an April report, the IMF forecast U.S. growth of 2.1 percent this year and 2.4 percent in 2013.

Further easing by the Federal Reserve might be needed if the situation were to deteriorate, IMF Managing Director Christine Lagarde said at a press conference in Washington on Tuesday. She said she welcomed previous actions by the Fed to help the U.S. economy.

Concern about a global economic slowdown put the S&P 500 last month on the brink of a so-called correction, or a 10 percent decline from a recent peak. The index slumped 3.3 percent in the second quarter, the biggest retreat since the period ending in September.

MModal Inc. (Nasdaq: MODL) surged 8.4 percent to $14.02. The company said it agreed to be bought by a JPMorgan Chase & Co. (NYSE: JPM) unit for about $1.1 billion.

Navistar International Corp. (NYSE: NAV) rose 7.2 percent to $29.04 after the truckmaker scheduled an operations update for investors this week that may include plans to drop one type of pollution-control technology.

The nation’s largest home-improvement retailers declined after Cleveland Research cited softer second-quarter sales. Lowe’s Cos. (NYSE: LOW) retreated 3.5 percent to $27.62. Home Depot Inc. (NYSE: HD) dropped 2.6 percent to $51.65.

Duke Energy Corp. (NYSE: DUK) lost 1.7 percent to $68.69 after unexpectedly announcing the resignation of Bill Johnson, previously named to be the chief executive officer after its takeover of Progress Energy Inc. (NYSE: PGN). James Rogers, the head of Duke, is CEO of the merged companies, effective immediately.

Johnson, 58, is resigning “by mutual agreement,” the company said. The takeover, announced in January 2011, received its final regulatory approval Monday. Tom Williams, a spokesman for Duke, declined to comment on the reason for the change. Johnson has been the chairman and CEO of Raleigh, N.C.-based Progress since 2007.

Bearish sentiment in an investor survey has surpassed the historical average for the longest stretch since October, when stocks began a rally that lifted the S&P 500 24 percent.