Aug. 3 (Bloomberg) -- U.S. stocks advanced, sending the Standard & Poor’s 500 Index above 1,000 for the first time since November, and commodities surged the most since March while Treasuries and the dollar fell on speculation the recession is ending.

Manufacturing and construction spending in the U.S. topped forecasts, and China’s factory output expanded. Copper climbed to the highest in 10 months, driving the UBS Bloomberg Constant Maturity Commodity Index to a 4.1 percent gain. Crude oil exceeded $70 a barrel for the first time since July 1. Ten-year Treasury notes declined the most in almost two months, and the dollar sank to the worst level against six trading partners since the weeks after Lehman Brothers Holdings Inc. collapsed.

The S&P 500 added 1.5 percent to 1,002.63 at 4 p.m. in New York. Wells Fargo & Co. and Bank of America Corp. rose more than 3.5 percent after HSBC Holdings Plc, Europe’s biggest bank, reported an unexpected profit of $3.35 billion. The Nasdaq Composite Index topped 2,000 for the first time since October.

“Investors are starting to come out of the foxhole,” said James Dunigan, the chief investment officer at PNC Financial Services Group Inc.’s wealth-management unit, which oversees $98 billion in Philadelphia. “Appetite for risk is increasing.”

Manufacturing in the U.S. shrank less than forecast as stimulus-induced gains in demand worldwide helped resuscitate factories from the worst slump in three decades. The Institute for Supply Management’s factory gauge rose to an 11-month high of 48.9 in July, according to the Tempe, Arizona-based group. Readings below 50 signal contraction. A report from the Commerce Department showed June building projects climbed 0.3 percent, helped by higher public spending.

Highest in a Year

China’s manufacturing expanded in July as record lending and a 4 trillion yuan ($585 billion) stimulus package stoked a recovery in the world’s fastest-growing major economy. The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 52.8, the highest level in a year, from 51.8 in June.

Raw-material and energy producers in the S&P 500 rallied, increasing 3.5 percent and 2.3 percent, respectively. Alcoa Inc., the biggest U.S. maker of aluminum, surged 7.1 percent to $12.60 in the steepest rally since April 9. Peabody Energy Corp. jumped 7.4 percent, the most since May 4, to $35.57. Peabody is the nation’s largest coal producer.

Copper for September delivery surged 4.4 percent to $2.7385 a pound in New York, while crude oil futures expiring next month rose 3.1 percent to $71.58 a barrel.

Banks and other financial institutions in the S&P 500 rallied 2.7 percent following HSBC’s report. Wells Fargo added 5.5 percent to $25.80, the highest price since May 18. Bank of America rose 3.6 percent to an eight-month high of $15.32.

Riskier Assets

Ten-year Treasury notes snapped four days of gains as the rally in stocks drove investors to riskier assets. The yield on the benchmark 10-year note increased 0.15 percentage point to 3.63 percent.

The TED spread, a gauge of financial-market stress, dropped to the lowest level in more than two years. The measure of the difference between what banks and the Treasury pay to borrow for three months narrowed to 0.294 percentage point, the first time it slid below 0.30 point since March 26, 2007.

The Dollar Index, which tracks the U.S. currency against the euro, yen, pound, Swedish krona, Canadian dollar and Swiss franc, dropped 1.1 percent to 77.451, the lowest level since Sept. 29. Lehman filed for the biggest bankruptcy on Sept. 15.

The yen fell against all of its most-traded counterparts, losing 0.6 percent to 95.28 against the dollar, on speculation the global recovery will encourage Japanese investors to buy higher-yielding assets overseas.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

Last Updated: August 3, 2009 16:59 EDT