The stock market broke two days of losses on Wednesday with solid gains as investors piled into shares of banks and energy companies.
Stocks jumped from the start on a rise in the price of crude oil, with banks joining the rally after a strong report on the service sector suggested the Federal Reserve may raise interest rates soon.
Banks can benefit when rates rise because it allows them to charge more for their loans. Bank of America rose 2%.
The yield on government bonds rose again, and investors dumped phone and real estate companies, sending them down nearly 2%. Investors find them less attractive as a source of income relative to bonds when yields are rising.
The Dow Jones industrial average climbed 112.58 points, or 0.6%, to 18,281.03. The Standard & Poor's 500 index gained 9.24 points, or 0.4%, to 2,159.73. The Nasdaq composite rose 26.36 points, or 0.5%, to 5,316.02.
The price of US benchmark crude closed near 50 dollars a barrel, its highest price since late June, after a US government report said energy stockpiles shrank last week, a surprise to most analysts. Chesapeake Energy rose 43 cents to 6.80 dollars, a 6.8% gain, the biggest in the S&P 500 index.
Investors have been pushing crude sharply higher since Opec announced a preliminary deal last week that would limit production, and the price is now nearly double its February low of 26 dollars.
A private report showed that US service companies grew last month at the fastest pace in nearly a year. The Institute for Supply Management said that its services index jumped to 57.1 in September, the highest point since October last year, the latest in a string of indicators that the economy is gaining strength.
Investors took that as a sign that the Federal Reserve is more likely to raise rates from super-low levels this year, and pushed yields on government bonds higher. The yield on the 10-year Treasury note rose to 1.71% from 1.69%, and is now up about a tenth of a percentage point since the start of the week, a big move.
Investors had been buying high-dividend stocks like utilities and phone and real estate companies as an alternative source of income to bonds, but are now having second thoughts as yields rise.
"Interest rates have been incredibly low, maybe artificially low, and everyone was chasing something with income, and they were blindly chasing them," said Eric Ervin, chief executive of Reality Shares, an investment firm. The rush out of the one-time high flyers, he added, is a "sign of normality".
Among stocks making big moves, Constellation Brands rose 2.75 dollars, or 1.7%, to 168.60 dollars after it reported strong sales of beers like Corona and Modelo in its latest quarter. It raised its projections for sales growth for its beer business.
Consulting firm Booz Allen Hamilton fell 1.19 dollars, or 3.8%, to 30.31 dollars. Federal prosecutors said a contractor for the National Security Agency had been arrested on charges that he illegally removed highly classified information, and The New York Times reported that the contractor worked for Booz Allen. The firm said it had fired an employee who had been arrested by the FBI.