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What is wrong with the vehicles?

Toyota said the accelerator pedal on the affected models can stick in a partially depressed position. It also can be slow to rise back up when you ease off the gas. In some cases, vehicle floor mats can become entangled with the accelerator pedal, trapping it down.

What should drivers do if they find themselves in a sudden-acceleration incident?

Test-track drivers found the most effective strategy was to hit the brake pedal hard and hold it. Don’t start pumping or pounding on the brakes. That kills the vacuum assist and makes them less effective. Toyota advises stepping on the brake pedal with both feet, using firm and steady pressure.

After hitting the brakes, shift the transmission into neutral.

"We found that it is very hard to bring the car to a complete halt with just the brake pedal," said Rik Paul, automotive editor of Consumer Reports magazine. "That’s why it is important to shift into neutral."

After disengaging the engine, pull safely off the road, turn off the car and park it.

Is there some warning that lets me know my car has the problem?

Don’t expect a warning light on the dashboard. You might notice that the pedal is getting harder to depress over time or is sluggish when you ease off the gas. Some drivers might notice a rough or "chatter"-like feeling depressing the accelerator, according to Toyota.

If I think this is happening to my vehicle, what should I do?

Toyota is telling owners to drive the vehicle to the nearest safe location, shut off the engine and contact a Toyota dealer for assistance.

Which models are affected?

Toyota said it stopped sales of the following models and years:

— 2009 and 2010 RAV4

— 2009 and 2010 Corolla

— 2009 and 2010 Matrix

— 2005 to 2010 Avalon

— 2010 Highlander

— 2007 to 2010 Tundra

— 2008 to 2010 Sequoia

The company also stopped sales of certain 2007 to 2010 Camry sedans, depending on where those vehicles were manufactured; Camry owners should check with their dealer to determine whether their car is affected.

What is Toyota doing to fix the pedal issue?

The automaker says it is working on a fix but hasn’t disclosed the details or timing of the remedy. The company insists the problem is "rare and infrequent" and said dealers should deal with customers "on a case-by-case basis."

What should I do if

I have questions?

Call the Toyota Customer Experience Center at

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Savvis Chairman James E. Ousely has been appointed interim CEO at the company after Chief Executive Phil Koen stepped down on Friday, Savvis announced today.

Koen had been with Savvis, the Town and Country-based provider of Internet infrastructure services for corporations, since March 2006. His resignation was effective at the end of last week.

“In consultation with our board of directors, and knowing we have a very strong leadership team in place, this is an excellent time for me to move on to a new opportunity and to watch Savvis continue to grow and excel,” Koen said in a company news release.

He didn’t elaborate on the opportunity that led him to resign.

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Stocks closed sharply lower Thursday after Greece received another credit downgrade and the dollar rose on the U.S. central bank’s cautious comments.

The Dow Jones industrial average (INDU) fell 133 points, or 1.3%. Declines were broad based, with 28 of the 30 Dow components ending lower.

The S&P 500 index (SPX) lost 13 points, or 1.2%. The Nasdaq composite (COMP) slipped 27 points, or 1.2%.

The stock slump came as the dollar rebounded 1.3% against the euro, to its highest levels since September. The greenback was also up sharply on the pound and slightly higher against the yen.

The dollar jumped Thursday for two reasons, according to Craig Peckham, strategist at Jefferies & Co. First, he said, were the "continuing jitters" after the Federal Reserve on Wednesday left interest rates unchanged near 0%, saying weakness would remain for some time. Adding to those fears were reports that Greece has been downgraded by Standard and Poor’s.

S&P’s move came after health care companies complained that the country was behind on payments related to its public health system, and it follows Fitch Rating’s downgrade of Greece on Dec. 8.

Marc Chandler, chief foreign exchange strategist for Brown Brothers Harriman, said those downgrades and persistent worries about the economy are driving up the dollar — and these concerns could carry extra weight amid "very thin" volume ahead of the holidays.

"Santa Claus is giving a little present to people like me, who are dollar bulls," Chandler said.

Despite posting gains early in the session, stocks ended mixed Wednesday after the Fed’s interest rate announcement.

Financials take a hit: The slump slammed several bank shares, with Citigroup (C, Fortune 500) closing down 7.5%, American Express (AXP, Fortune 500) off 2% and JPMorgan Chase (JPM, Fortune 500) down 2.6%.

According to reports, the Treasury canceled plans to start selling off part of its 34% stake in Citi after its offering of 5.4 billion shares of common stock drew weak demand.

The offering was part of a plan Citi announced late Wednesday, in which the New York-based lender said it intends to raise $20.5 billion in the stock market in a plan to pay back its bailout funds.

"The market is struggling to absorb these staggering amounts of new issue," said Jefferies’ Peckham. "Marry that with the overriding theme of caution, and investors will be nervous."

Bank of America (BAC, Fortune 500) said late Wednesday it appointed senior executive Brian Moynihan as its new chief executive officer. Moynihan is currently the president of consumer and small business banking high risk personal loans. Exiting CEO Ken Lewis surprised the board of directors when he announced plans to retire in September. Shares were down 1.1%.

Economy: The Labor Department reported jobless claims rose unexpectedly last week, jumping by 7,000 to 480,000. Analysts predicted a decline to 465,000 new claims.

The November index of leading economic indicators, from the Conference Board, rose 0.9% — beating expectations of a 0.7% jump.

The Philadelphia Fed index, a regional read on manufacturing, far surpassed expectations. The reading jumped to 20.4 in December, the highest since April 2005, from 16.7 in November. Analysts expected a decline to 16.0.

In Washington, a Senate Banking committee voted 16-to-7 to confirm Ben Bernanke for another four-year term running the Federal Reserve.

Companies: Before the start of trading Thursday, package-delivery firm FedEx (FDX, Fortune 500) reported earnings of $1.10 per diluted share, down from $1.58 one year ago.

FedEx issued cautious guidance for the third quarter of 50 to 70 cents per diluted share. That fell short of forecasts of 84 cents per share, and the stock price lost 6.1%.

After the market close Thursday, Oracle (ORCL, Fortune 500) reported a profit of 39 cents a share versus 34 cents a year ago. The software company’s results beat analyst expectations of 36 cents per share.

Also after the bell, Nike (NKE, Fortune 500) reported a second-quarter profit of 76 cents a share, down from 80 cents a share. Analysts were looking for 71 cents a share.

Smartphone maker Palm (PALM) reported a wider-than-expected loss of 37 cents per share in its second fiscal quarter.

Palm’s rival, Blackberry maker Research in Motion (RIMM), earned $1.10 per share, up from 69 cents a year ago. RIM shares were up about 11% in after-hours trading.

World markets and commodities: Stocks in Asia ended mixed, with Tokyo’s Nikkei index falling 0.13% and Hong Kong’s Hang Seng index off 1.22%. European indexes settled lower.

Crude oil for January delivery fell 1 cent to settle at $72.65 a barrel, while gold for February delivery plunged $28.80 to end at $1,107.40 an ounce.

Bonds were higher, with the benchmark 10-year yield slipping to 3.49% from 3.59% late Wednesday.

Market breadth was negative. On the New York Stock Exchange, losers beat winners almost three to one on volume of 1.7 billion shares. On the Nasdaq, decliners topped advancers almost three to one on volume of 1.9 billion shares. 

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Stapleton NorthSide

Land area 7.5 sq. miles 2.3 sq. miles

Projected new homes 10,000 10,000

Projected new jobs 30,000 22,000

Tax increment financing $280 million (so far) $390 million (projected)

Construction start 2001 2010

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Sales at U.S. retailers unexpectedly fell in July, raising the risk that consumers will keep cutting back as job losses mount and temper a recovery from the worst recession since the 1930s.

Purchases decreased 0.1 percent, the first drop in three months, as shrinking demand at department stores such as Macy’s Inc. and Wal-Mart Stores Inc. overshadowed a boost from the cash-for-clunkers automobile incentive program, Commerce Department figures showed today in Washington.

A separate government report today showed more Americans than forecast filed claims for unemployment insurance last week, underscoring the threat to spending from the continued deterioration in the job market. Treasury securities jumped and the dollar fell after the reports, and some economists lowered estimates for growth this quarter.

“Until we start seeing job growth, consumers are still going to be very cautious,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, which accurately forecast the drop in purchases excluding automobiles. “It’s premature to talk about the sustainability of a recovery,” he said, until there’s “follow-through on the demand side.”

The gain in Treasuries sent the yield on the benchmark 10- year note down to 3.66 percent at 11:40 a.m. in New York from 3.72 percent late yesterday. The dollar dropped against the Japanese yen to 95.47 yen from 96.06 on Aug. 12. Stocks were little changed.

More Claims

The Labor Department said today that 558,000 people filed first-time claims for jobless benefits last week, up from 554,000 the week before.

Retail sales were projected to rise 0.8 percent, according to the median estimate of 76 economists in a Bloomberg News survey. Forecasts ranged from a decline of 0.9 percent to a gain of 2 percent. Commerce revised June sales up to show a gain of 0.8 percent from the 0.6 percent increase previously reported.

Excluding automobiles, sales fell 0.6 percent, also worse than anticipated and the biggest drop since March. They were forecast to increase 0.1 percent, according to the survey.

Americans cut back on furniture, electronics, building materials, groceries and sporting goods in July, according to the report. The drop in sales at department stores, at 1.6 percent, was the biggest this year.

‘In the Tank’

“It’s hard to find anything encouraging in this report,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “For the most part, discretionary spending is in the tank.”

Walmart, the world’s largest retailer, today reported profit that exceeded some analysts’ estimates after managing inventory to lower costs fast cash. Comparable-store sales trailed the company’s forecast.

The drop in sales was attributable to consumers being “more selective” in buying discretionary items and to larger declines in grocery prices than anticipated, Eduardo Castro- Wright, Walmart’s U.S. stores chief, said on a recorded call.

Macy’s, the second-biggest U.S. department store chain, said yesterday it cut inventories 7.5 percent in the second quarter from a year ago as sales dropped.

Other reports today showed companies trimmed inventories in June for a 10th consecutive month, and prices of imported goods dropped in July for the first time in six months as the cost of commodities such as petroleum and chemicals decreased.

Cash for Clunkers

Figures from the retail sales report showed the government’s cash-for-clunkers plan did boost auto purchases, confirming industry data released earlier this month. Sales at dealerships and parts stores climbed 2.4 percent last month, the biggest gain since January.

The government is offering credits of up to $4,500 to trade in gas-guzzlers for more fuel-efficient vehicles. President Barack Obama last week signed into law an emergency measure giving an additional $2 billion to the program after the original $1 billion ran out three months earlier than projected. The infusion of funds was meant to extend the program through August.

Excluding autos, gasoline and building materials — the retail group the government uses to calculate gross domestic product figures for consumer spending — sales dropped 0.2 percent after no change in June. The government uses data from other sources to calculate the contribution from the three categories excluded.

Forecasts Trimmed

After the report, economists at Morgan Stanley in New York projected the economy will expand at a 3.7 percent annual pace this quarter, down from a prior estimate of 4.2 percent.

The economy has lost about 6.7 million jobs since the recession started in December 2007, the worst of any downturn since World War II. GDP contracted at a 1 percent annual rate in the second quarter, the fourth consecutive drop.

Federal Reserve policy makers yesterday said they will hold the benchmark interest rate “exceptionally low” for an “extended period” to help sustain a recovery. They also added “sluggish income growth” to the list of reasons why household spending is likely to be slow to rebound. Headwinds previously mentioned included job losses, tight credit and falling home values.

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Group of Eight leaders said the economic recovery from the steepest recession since World War II was too fragile for them to consider reversing efforts to pump money into the economy.

President Barack Obama pressed for the door to remain open to more stimulus measures as a renewed stock-market drop stirred concern that $2 trillion spent worldwide so far hasn’t jolted consumers and businesses back to life.

“The G-8 needed to sound a second wakeup call for the world economy,” British Prime Minister Gordon Brown told reporters yesterday in L’Aquila, Italy, after the opening sessions of the leaders’ annual gathering. “There are warning signals about the world economy that we cannot ignore.”

Divergences over what to do next and calls from developing nations to do more to counter the slump underscored the G-8’s limited room for maneuver. The biggest borrowing spree in 60 years has failed to halt rising unemployment and left investors doubting the strength of the recovery. The MSCI World Index of stocks slid for a fifth day. The 23-nation index has dropped 8 percent since a three-month rally ended on June 2.

“Economies still need as much stimulus as possible,” said David Page, an economist at Investec Securities in London. “It’s important not to react too soon to early signs of a pickup or take false comfort from them.”

IMF Forecasts

The International Monetary Fund echoed that skepticism, upgrading its 2010 growth forecast while saying the rebound will be “sluggish” and urging governments to stay the economic- stimulus course.

Emerging countries like China will lead the way, expanding 4.7 percent next year, the IMF said yesterday, up from an April prediction of 4 percent. The Washington-based lender forecast growth of 0.6 percent in the advanced economies, up from expectations of stagnation.

“It’s a very volatile situation,” European Commission President Jose Barroso said in a Bloomberg Television interview in L’Aquila. “We are not yet out of the crisis, but it seems now that the free fall is over.”

In the U.S., a jump in the jobless rate to a 26-year-high of 9.5 percent in June and a 6.9 percent drop in the Standard & Poor’s 500 Index in the past month raised questions whether Obama’s $787 billion stimulus package is turning the world’s largest economy around.

Democrats in Congress are split over whether to spend more, adding to a deficit that the IMF puts at 13.6 percent of gross domestic product in 2009, the highest since World War II.

‘Potentially Counterproductive’

Obama straddled the issue yesterday, telling ABC News that spending more borrowed money is “potentially counterproductive.”

A G-8 statement yesterday embraced options ranging from the second U.S. stimulus package some lawmakers and economists are advocating to Germany’s emphasis on shifting the focus to deficit reduction fast payday loans.

“Exit strategies will vary from country to country depending on domestic economic conditions and public finances,” leaders of the eight economies — the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia — said in the statement.

“There is still uncertainty and risk in the system,” Mike Froman, deputy U.S. national security adviser, told reporters in L’Aquila. While exit strategies can be drawn up, it’s not “time to put them into place.”

Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114 percent of gross domestic product in 2014, the IMF forecasts.

‘Exit Strategy’

German Chancellor Angela Merkel is the leading opponent of additional stimulus, pushing through a statement at last month’s European Union summit that called for “a reliable and credible exit strategy.”

Merkel, campaigning for re-election in September, has warned against billowing budget deficits, which will rise in the EU to an average of 6 percent of GDP in 2009 from 2.3 percent last year, the EU forecasts.

“We have to get back on course with a sustainable budget, but with the emphasis on when the crisis is over,” Merkel said.

The 16-nation euro economy has shown some signs of resilience since shrinking 2.5 percent in the first quarter, the most since the currency’s birth in 1999. While measures of business confidence, manufacturing and services have ticked up, job cuts by companies from Austrian Airlines AG to ThyssenKrupp AG pushed up unemployment to 9.5 percent in May, a 10-year high.

Asian Resilience

Further signs of a resilience also emerged in the Asia- Pacific region, where governments including China and Australia have boosted spending to increase economic growth. Australia’s jobless rate rose in June by less than forecast, climbing to 5.8 percent from 5.7 percent, a report showed today. Analysts tipped a 5.9 percent rate.

In China, new loans rose almost fivefold in June from a year earlier to 1.53 trillion yuan ($224 billion), the central bank said on its Web site yesterday. China’s passenger-vehicle sales rose 48 percent in June, the biggest jump since February 2006.

Canadian Prime Minister Stephen Harper occupied the middle ground, saying the first priority is to spend wisely what has already been committed.

“Before there’s talk of additional stimulus, I would urge all leaders to focus first on making sure that the stimulus that’s been announced actually gets delivered,” Harper said.

Russia, a G-8 member generally classified as an “emerging” economy, also believes that exit strategies “have to be developed already now,” said Andrei Bokarev, a Russian official.

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Europe’s manufacturing and service industries contracted at a slowest pace in nine months in June, adding to signs the recession is bottoming out.

A composite index of both industries for the 16 euro nations rose to 44.4, the highest since September, from 44 in May. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates a contraction. Economists forecast an increase to 44.9, according to the median of 12 estimates in a Bloomberg News survey.

The European economy is showing signs of stabilization after shrinking at the fastest pace in at least 15 years in the first quarter. German and French business confidence rose for a third month in June, reports showed this week. European Central Bank President Jean-Claude Trichet said this month the worst of the recession may be past after the ECB cut interest rates to a record low and pledged to buy covered bonds to fight the crisis.

Today’s report adds “to recent evidence that the worst may be behind and that the euro-zone economy is stabilizing,” said Carsten Brzeski, an economist at ING Groep NV in Brussels. “However, there is no reason for overhasty enthusiasm. A return to positive growth numbers might have to wait until 2010.”

Markit’s manufacturing index rose to 42.4 this month from 40.7 in May, according to today’s report. The services index fell to 44.5 from 44.8.

Financial Crisis

The worldwide financial crisis, which started with the collapse of the U.S. subprime-mortgage market in 2007, has led to more than $1.46 trillion of writedowns and credit losses at financial institutions, according to data compiled by Bloomberg, and sent the global economy into its first recession in more than six decades.

The euro-area economy may shrink about 4.6 percent this year and around 0.3 percent in 2010, the ECB forecasts. Trichet said on June 4 that the economy may contract “at much less negative rates” in the second half of the year. In the first quarter, gross domestic product dropped 2.5 percent.

ECB council member Ewald Nowotny said in a June 19 interview that the central bank won’t substantially alter its assessment of the economic outlook and is likely to keep interest rates steady for at least the rest of 2009. The ECB’s plan to purchase 60 billion euros ($83.2 billion) of covered bonds to spur lending will be carried out mainly by national central banks and maturities won’t exceed five years, Nowotny said in the interview in Vienna cash advance.

Global Slump

Companies across Europe have been forced to cut output and eliminate jobs to weather the global slump. Stuttgart, Germany- based Porsche SE, the maker of the 911 sports car, said on June 19 that nine-month revenue dropped 15 percent.

Europe’s economy lost a record 1.22 million jobs in the first quarter with payrolls declining 0.8 percent from the previous three months. The jobless rate, already at a decade- high 9.2 percent, may jump to 11.5 percent in 2010, the European Commission forecasts.

With increased unemployment offsetting the benefits of falling consumer prices, French household spending unexpectedly plunged 1.6 percent in May from a year earlier and was down 0.2 percent on the month, data today showed. Paris-based Air France- KLM Group may need to eliminate another 3,000 jobs, Chief Executive Officer Pierre-Henri Gourgeon said last week.

European stocks were lower. The Dow Jones Stoxx 600 Index was down 0.3 percent at 201.71 at 9:45 a.m. in London.

‘Eye of the Storm’

Deutsche Bank AG Chief Operating Officer Hermann-Josef Lamberti said on June 18 that the market is still in “the eye of the storm” as the credit crisis affects the real economy. “By no means is the worst over,” said Lamberti, who is also a member of the management board at Germany’s largest bank. “The financial crisis isn’t over.”

PSA Peugeot Citroen, Europe’s second-largest carmaker, said today that it may have an operating loss of as much as 2 billion euros this year, depending partly on the aid the French government is able to offer the auto industry. “A number of uncertainties remain,” the Paris-based company said.

European governments have boosted spending to bolster their economies, while the ECB this month kept its key rate at a record low of 1 percent. Gains in business and consumer confidence indicate that the measures may be starting to show results. Consumer confidence in Germany, the region’s largest economy, rose for a second month, data today showed.

“The euro-zone economic recovery is far from guaranteed and relapses remain a very serious danger,” said Howard Archer, chief European economist at IHS Global Insight in London. “It is imperative that the ECB does not rule out taking further efforts to boost economic activity.”

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Manufacturing in the New York region this month contracted at a faster pace as sales and inventories declined, showing the economy is still months away from a sustained recovery.

The Federal Reserve Bank of New York’s June general economic index fell to minus 9.4, less than forecast, from minus 4.6 the prior month, the bank said today. Readings below zero for the Empire State index signal manufacturing is shrinking.

U.S. companies are likely to keep cutting stockpiles until sales improve, indicating orders and production will be restrained. The New York Fed’s factory gauge of the outlook for the next six months climbed to the highest level in almost two years as the drawdown in goods on hand clears the way for factories to ramp up output in coming months.

“The road to recovery in manufacturing is going to be long and gradual,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “At some point manufacturers will cut inventories to below final demand and that will set the stage for a recovery in production.”

Stocks extended losses following the report and Treasury securities rose. The Standard & Poor’s 500 index was down 1.4 percent to 932.82 at 9:40 a.m. The yield on the 10-year Treasury note decreased to 3.72 percent from 3.79 percent late on June 12.

Less than Forecast

Economists projected the Empire State index would hold unchanged at minus 4.6, according to the median of 43 estimates in a Bloomberg News survey. Forecasts ranged from 5 to minus 8.1.

The International Monetary Fund today raised its outlook for the U.S. and called for steps to reduce concern about rising public debt and inflation. The lender forecasts the world’s largest economy will contract 2.5 percent this year before expanding 0.75 percent in 2010. In April, the IMF projected the economy would contract 2.8 percent this year.

International holdings of long-term U.S. financial assets, a haven for investors during the global financial crisis, rose at a slower pace in April as China, Japan and Russia trimmed their holdings of Treasuries, the government also reported today. Total net purchases of long-term equities, notes and bonds rose a net $11.2 billion, compared with buying of $55.4 billion in March.

Growing Optimism

Factory executives in the New York Fed’s district, which encompasses New York state, northern New Jersey and one county in Connecticut, turned more optimistic about the future. The gauge measuring the manufacturing outlook climbed to 47.8, the highest level since July 2007, from 43.8.

The New York Fed’s measure of new orders increased to minus 8 car insurance.2 from minus 9 and a gauge of shipments fell to minus 4.8 from 1.3. The index of inventories decreased to minus 25.3 from minus 21.6.

The index of prices paid increased to minus 5.8 from minus 11.4, and the gauge of prices received rose to minus 12.6 from minus 27.3. A measure of employment improved to minus 21.8 from minus 23.9.

The headline New York Fed survey number conveys the general impression of executives on whether activity is increasing or decreasing, and isn’t a composite of the other readings.

‘Disappointing’ Reading

Although the main reading was “disappointing from the perspective of the stabilization story, the details of the report were not as weak as the headline,” John Ryding, chief economist at RDQ Economics in New York, wrote in a note to clients.

Today’s report is one of the earliest measures of regional manufacturing this month. The Philadelphia Fed report, due June 18, may show manufacturing in that region contracted at a slower pace in June, according to the Bloomberg survey median.

Regional and national purchasing manager surveys have shown a declining rate of contraction in recent months, one sign the worst of the manufacturing slump may have passed. Still, General Motors Corp. and Chrysler LLC’s plant closings as part of their bankruptcy reorganizations portend the auto industry will weaken further before it gets better.

Economists surveyed by Bloomberg News June 1 to June 8 projected the U.S. economy would grow at an average 1.2 percent pace in the second half of the year after falling by 2 percent in the second quarter. They also estimated the jobless rate will climb to 10 percent by the end of the year.

Signs of Improvement

Some companies, particularly technology and industrial- materials firms, are seeing signs the outlook is improving.

Armonk, New York-based International Business Machines Corp. last month said it’s “ahead of pace” to meet its 2010 earnings forecast.

Alcoa Inc., the largest U.S. aluminum producer, said May 29 that distributors of the lightweight metal are showing renewed buying interest and will generate a “giant sucking sound” of demand when the global economy revives.

Distributors “know if the green shoots turn over to become demand, they will not be able to supply,” Alcoa Chief Executive Officer Klaus Kleinfeld said at a presentation in New York. “The distribution chain will generate this giant sucking sound of demand.”

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Stocks rallied Monday, sending the Dow Jones industrial average near the breakeven point for the year, as better-than-expected readings on manufacturing activity raised hopes that a global economic recovery is brewing.

The Dow Jones industrial average (INDU) surged 221 points, or 2.6%, to close at 8,721.44 points. The bluechip average is within 55 points of breaking even for the year.

The broader S&P 500 (SPX) rose 24 points, or 2.6%, to about 943 points - its highest level of the year. The Nasdaq composite (COMP) jumped 54 points, or 3%.

The rally was broad based, with industrial and technology stocks leading the pack. Boeing (BA, Fortune 500) rose 6.5% and United Technologies Corp. (UTC) gained 5.3%. Shares of energy producers Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500) rose as oil topped $68 a barrel.

As stocks advanced, demand for safe-haven assets evaporated. The yield on the benchmark 10-year note rose to 3.7% as its price fell sharply.

Stocks opened higher as investors looked past an official declaration of bankruptcy by General Motors, which had been widely expected. The rally gained steam after an industry report showed U.S. manufacturing activity shrank at a slower pace last month.

"Today’s data were better than expected, both here and abroad," said Phil Orlando, chief equity market strategist at Federated Investors. The recession has "reached its nadir" and the improved economic outlook has helped "draw some cash off the sidelines," he said.

Wall Street rallied Friday, with the major indexes ending May in positive territory. That marked the third consecutive month that stocks have risen, though May’s gains were smaller than those posted in the previous two months.

Looking ahead, automakers report monthly sales figures Tuesday. And investors are already bracing for the government’s closely-watched jobs report due Friday.

Economy: The manufacturing sector contracted in May, but the pace of deterioration was slower than expected, according to an industry report.

The Institute for Supply Management said its index of national factory activity rose to 42.8 from 40.1 in April. Economists had expected the index to increase to 42, according to a survey by Briefing.com.

A reading below 50 in the index indicates the manufacturing sector is contracting. But May’s gain puts the index over the tipping point that suggests expansion in the overall economy. A reading above 41.2%, over a period of time, is generally consistent with growth in gross domestic product.

Meanwhile, two separate reports showed manufacturing activity in China expanded last month. A measure of India’s manufacturing sector rose to its highest level in eight months.

European manufacturing activity shrank at a slower pace in May, with a euro zone purchasing managers index marking its biggest monthly jump on record instant payday loan.

In the United States, construction spending unexpectedly rose 0.8% in April, its biggest increase in eight months, the Commerce Department reported. Analysts had forecast spending to fall 0.8%.

Separately, personal income rose 0.5% in April, the biggest increase in 11 months, the government reported Monday. But consumer spending dropped 0.1%.

Dow changes: Two Dow components, General Motors and Citigroup (C, Fortune 500), will be officially removed from the average June 8, Dow Jones announced Monday. Travelers Companies (TRV, Fortune 500) will take the place of Citi; Cisco Systems (CSCO, Fortune 500) will fill GM’s slot on the Dow.

"I think getting some of the dogs out of the Dow is helping [to] feed the psychology," said Nick Kalivas, vice president of financial research at MF Global. But Monday’s manufacturing reports were the main driver of the rally, he added.

Autos: GM (GM, Fortune 500) filed for bankruptcy protection Monday in a move aimed at helping the once-mighty automaker emerge with only its more profitable plants, brands, dealerships and contracts.

GM’s stock rose 18% earlier in the session. Analysts said the rally was related to short selling, a strategy that allows investors to sell stock they don’t yet own and then buy it later when the price falls. On Monday investors were buying back shares to cover their short positions, driving up the price. Shares closed 8% higher.

GM stock will begin trading on the "Pink Sheets" on Tuesday morning, said Cromwell Coulson, CEO of Pink OTC Markets Inc. Pink sheets allow for trading in certain stocks that are not listed on an exchange or the Nasdaq.

GM’s bankruptcy filing occurred just hours after a U.S. Bankruptcy Court judge in New York approved Chrysler’s sale of most of its assets to Italian carmaker Fiat.

Bonds: Treasury prices fell, with the yield on the benchmark 10-year note rising to 3.71% from 3.46% Friday. Bond prices and yields move in opposite directions.

Other markets: Asian stocks soared, with Japan’s Nikkei adding 1.6%. European markets rallied, with shares gaining between 2% and 4%.

In currency trading, the dollar fell against the euro and the British pound. It rose against the Japanese yen.

NYMEX oil for July delivery rose by $2.27 a barrel to settle at $68.58.

COMEX gold for August delivery fell 30 cents to close at $980 an ounce. 

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