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. Last Updated: 07/27/2016

Dow, Nikkei Soar on Rebound Hopes

NEW YORK -- U.S. stocks ended sharply higher Monday, pushing the blue-chip Dow to its highest level in almost a year, after a report on New York state's manufacturing sector proved surprisingly strong and sparked hopes that the U.S. economy will recover later this year.

Stocks have rallied for more than three months, as investors have disregarded lackluster economic data and bet on a rebound in the year's second half.

Since hitting its low for the year on March 11, the broad Standard & Poor's 500 index has climbed 26 percent.

Expectations of an interest-rate cut by the Federal Reserve's policy board, which meets on June 24-25, also fueled investors' optimism.

Low rates cut borrowing costs for companies, helping their bottom lines.

"We're at the point where economic data, no matter what comes out between now and next Tuesday, will be viewed through rose-colored glasses," said Andrew Baker, a senior trader at Wedbush Morgan in Los Angeles.

"Weaker data can be interpreted as a higher chance of a rate cut, which is good for the market and the economy, and better economic data will signify the economy is turning around," he said.

The Dow Jones industrial average finished up 201.84 points, or 2.21 percent, at 9,318.96, its highest close since July 5, 2002.

All 30 Dow components ended higher.

In Japan, meanwhile, the key Nikkei average closed above the psychologically important 9,000 level on Tuesday for the first time since December, bolstered by foreign investors' buying of Canon Inc. and other large-cap blue chips.

Behind their buying are views that a near-term cut in U.S. interest rates to prevent deflation will allow fund managers to be exposed to much riskier assets than before, including Japanese stocks, which are a laggard globally, analysts said.

The key Nikkei closed up 2.19 percent at 9,033, its highest close since Dec. 3.