Gain in services powers stocks

Stocks surged Tuesday to their highest level in five months after a measure of the most important driver of the U.S. economy surged ahead in September, a hopeful sign for the country's main source of employment.

A move by the Bank of Japan to cut its key interest rate to virtually zero also lifted stocks worldwide. The dollar fell as investors shed defensive assets, and a gauge of U.S. stock market volatility fell.

The Institute for Supply Management reported that its index of business activity at U.S. service companies expanded again last month, and far faster than analysts were expecting. The ISM's measure of service companies encompasses a wide range of industries including finance, health care and trade. Service providers account for about 83 percent of all private employment in the United States.

Traders are also hoping to get more positive news from the beginning of corporate earnings reports this week and from another key economic indicator, the Labor Department's monthly jobs survey on Friday. PepsiCo Inc. and Alcoa Inc. report results Thursday.

The Dow Jones industrial average rose 193.45 points, or 1.8 percent, to close at 10,944.72, its highest close since May 3 and its biggest gain since Sept. 24.

All but one of the 30 companies that make up the average rose, led by Boeing Co. and Bank of America. The Standard & Poor's 500 index rose 23.72, or 2.1 percent, to 1,160.75. The index broke through 1,150, a level it hadn't traded above since mid-May, and kept on going. The Nasdaq composite index rose 55.31, or 2.4 percent, to 2,399.83.- AP