That helped stocks build on the huge gains they made Friday. The U.S. economy has been a top concern for investors over the last three months, and the strong report on service companies showed that banks, health care and construction companies were holding up well.
Dollar stores and other retailers, clothing companies and car makers all climbed. Amazon surpassed Microsoft to become the most valuable publicly-traded company.
The S&P 500 added 17.75 points, or 0.7 percent, to 2,549.69. The index, a benchmark for many mutual funds, closed at its highest in more than three weeks.
The Dow Jones Industrial Average climbed 98.19 points, or 0.4 percent, to 23,531.35. The Nasdaq gained 84.61 points, or 1.3 percent, to 6,823.47.
Smaller companies, which tend to be more closely linked to how well the domestic economy is doing, did far better than the rest of the market. The Russell 2000 jumped 24.62 points, or 1.8 percent, to 1,405.37.
Amazon rose 3.4 percent to $1,629.51, bringing its value to $796.8 billion, compared to $783.6 billion for Microsoft.
Dollar Tree rose after activist investment firm Starboard value disclosed a stake in the discount retailer and pushed the company to consider selling the Family Dollar chain it bought in 2015. It nominated seven candidates for seats on Dollar Tree’s board of directors. The stock climbed 5.5 percent to $97.96. Elsewhere, Target gained 4.9 percent to $69.68.
Oil prices continued their recent rally. U.S. crude rose 1.2 percent to $48.52 per barrel in New York. After sinking to an 18-month low of $42.53 a barrel on Dec. 24, the price of U.S. crude has risen for seven of the last eight trading days. Brent crude, used to price international oils, rose 0.5 percent to $57.33 per barrel in London.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.69 percent from 2.65 percent.
The parent company of Pacific Gas & Electric plunged after Reuters reported that the company might file for bankruptcy protection as it faces potentially huge liabilities connected to deadly wildfires in California in 2017 and 2018. The company’s stock dropped 22.3 percent to $18.95. PG&E traded at almost $70 a share in October 2017 and about $48 in November 2018.
In the second big pharmaceutical deal of 2019, Eli Lilly will buy Loxo Oncology for about $8 billion as it bulks up on cancer treatments that target gene abnormalities. Loxo soared 66.3 percent to $232.65 and Lilly added 0.5 percent to $115.28.
Nasdaq fell 2.6 percent to $79.81 and Intercontinental Exchange, the parent company of the New York Stock Exchange, fell 3 percent to $73.38.
In other commodities trading, wholesale gasoline dipped 0.5 percent to $1.34 a gallon and heating oil rose 0.5 percent to $1.78 a gallon. Natural gas sank 3.3 percent to $2.94 per 1,000 cubic feet.
Gold rose 0.3 percent to $1,289.90 an ounce. Silver slipped 0.2 percent to $15.76 an ounce. Copper fell 0.4 percent to $2.64 a pound.
The dollar rose to 108.59 yen from 108.51 yen. The euro rose to $1.1478 from $1.1400.