Published: November 09, 2009 11:17 am      

(11:18 a.m.) Wall Street

IEVA M. AUGSTUMS,AP Business Writers

TIM PARADIS,AP Business Writers

NEW YORK (AP) — Stocks jumped to new highs for the year Monday as the dollar extended its slide, boosting prices for commodities including gold and oil. Energy and materials stocks led the market higher.

Investors were also buying stocks on growing confidence about the global economic recovery, getting a shot of optimism from news this weekend that the Group of 20 countries will keep stimulus measures in place. Investors saw the agreement as a signal that interest rates would remain low. Major stock indexes rose more than 1 percent, including the Dow Jones industrial average, which rose 150 points.

Investors around the world are seeing the dollar as weaker than other currencies because of low U.S. interest rates, and so they're using it for what's known as "carry trade," to finance purchases of investments in other countries. That trend takes the dollar down when those purchases are made.

Stock investors like a weaker dollar because it helps U.S. exporters by making their goods cheaper to overseas buyers and giving the companies a boost when they convert profits from abroad to dollars.

The U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell more than 1 percent to its lowest level of the year. The index began sliding for the past eight months since major stock indicators bounced off 12-year lows. Investors, although they've been basing most of their buy or sell decisions on the economy, have also been following a pattern of funneling money into stocks when the dollar weakens and pulling it out when the currency rises.

Commodities prices, meanwhile, tend to rise when the dollar is down, so gold topped $1,100 an ounce. Crude oil rose $2.07 to $79.50 per barrel on the New York Mercantile Exchange, helped in part by Tropical Storm Ida, which threatened the Gulf of Mexico.

Energy and materials stocks rose along with commodities prices, and investors' enthusiasm for those stocks spilled over to other industries.

Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago, said the strength of the carry trade is giving an artificial lift to a range of assets, including stocks.

"There's cheap money that's going to be pumping its way into the system," he said. "That money is finding is home in the currency and commodity markets."

In midday trading, the Dow rose 147.60, or 1.5 percent, to 10,171.02. The index rose as high as 10,175.10, topping its previous 12-month trading high of 10,119.46 set Oct. 21.

The broader Standard & Poor's 500 index rose 16.38, or 1.5 percent, to 1,085.68, and the Nasdaq composite index rose 29.56, or 1.4 percent, to 2,142.00.

In corporate news, McDonald's, the world's largest fast-food chain, said monthly sales growth was relatively flat in the U.S. but offset by stronger growth globally. The stock rose 71 cents to $62.43.

Britain's Cadbury Plc rejected a $16.4 billion hostile takeover bid from Kraft Foods Inc. Cadbury rose 35 cents to $50.85, while Kraft fell 35 cents to $26.43.

Among energy stocks, Exxon Mobil Corp. rose 64 cents to $72.80, while Chevron Corp. rose 26 cents to $77.79. Aluminum producer Alcoa Inc. rose 41 cents to $13.30.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.49 percent from 3.50 percent late Friday.

The latest burst of enthusiasm about the potential for the economy comes as investors await retailers' quarterly earnings reports to see how much consumers are spending as the holidays approach. The market is concerned that rising unemployment, which now stands at 10.2 percent, will further discourage already hesitant consumers from spending.

Still, the Labor Department's jobs report from Friday hasn't deterred investors, who were buying stocks on the theory that the weak labor market will prompt the Federal Reserve to keep interest rates low for some time.

Five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 411.6 million shares compared with 422.3 million shares traded at the same point Friday.

The Russell 2000 index of smaller companies rose 8.76, or 1.5 percent, to 589.11.

Overseas, Japan's Nikkei stock average rose 0.2 percent. In afternoon trading, Britain's FTSE 100 rose 1.5 percent, Germany's DAX index advanced 1.8 percent, and France's CAC-40 rose 1.7 percent.