Wall Street shot higher Monday, sending the Dow Jones industrial average above 14,000 for the first time in 2 1/2 months as investors moved back into stocks at the start of the fourth quarter. The blue chip index rose more than 200 points as it surged to a new trading high.

While the beginning of the new quarter was an incentive for institutional investors to buy, the market was also encouraged that the worst might be over from the summer's credit and stock market turmoil. And new economic data might nudge the Federal Reserve toward another interest rate cut at its Oct. 30-31 meeting.

Investors bought financial shares on the belief that the industry has generally weathered the recent credit market upheaval. Both Citigroup (C) and Switzerland's UBS AG (UBS) issued third-quarter profit warnings, but indicated the current period might see a return to normal earnings levels.

The market grew more optimistic that the Fed might lower rates to boost the economy after a report showed that manufacturing grew in September at the slowest pace in six months. The Institute for Supply Management said its index of manufacturing activity registered at 52.0 in September, below forecasts for a reading of at least 52.5.

"People are getting more confident there is going to be an October rate cut," said John C. Forelli, portfolio manager for Independence Investment. "To some degree, it looks like Citi kitchen-sinked the quarter, and that from here going forward will be calmer. That's underpinning the financials."

Enthusiasm about acquisition activity picked up after Nokia (NOK) unveiled an $8.1 billion offer to buy navigation-software maker Navteq Corp. (NVT). The deal was seen as a signal that corporations are feeling comfortable in making big moves despite recent market turbulence.

In midafternoon trading, the Dow rose 204.84, or 1.47 percent, to 14,100.47. The Dow surpassed its closing record of 14,000.41 set in mid-July, and moved into record territory, rising as high as 14,105.19 and eclipsing its previous intraday high of 14,021.95 set July 17.

Broader market indexes also rose sharply. The Standard & Poor's 500 index rose 19.80, or 1.30 percent, to 1,546.55; and the Nasdaq composite index rose 37.98, or 1.41 percent, to 2,739.48.

The Dow finished a turbulent third quarter with a 3.6 percent gain, after the Fed eased investor concerns over the credit and housing markets by lowering key interest rates half a percentage point.

Bonds moved higher Monday, with the yield on the benchmark 10-year Treasury note falling to 4.56 percent from 4.59 percent late Friday. Fixed-income investors, currently concerned about the dollar's recent weakness, interpreted the ISM report as not necessarily portending an interest rate cut, which would further erode the U.S. currency.

The dollar was mixed Monday against other major currencies, while gold prices were higher.

A barrel of light, sweet crude fell $1.92 to $79.76 on the New York Mercantile Exchange. This extended last week's decline amid concerns that oil market fundamentals do not support recent high prices.

Arthur Hogan, chief market analyst at Jefferies & Co., said the biggest tipping point of the day was financial stocks. For the first time, Citi — considered a barometer for the banking industry — is giving some real number about the extent of its damage, he said.

"If they are giving us worst-case scenario, then market participants are feeling that most of the stuff we've worried about since July will remain contained," he said. "That's the celebration the market is putting on right now, and the take away is that the black hole of not knowing finally has some numbers around it."

Financial stocks — from brokerages to retail banks — slumped during the third quarter as uncertainty grew about the extent of losses from the credit and subprime mortgage turmoil. Comments from Citi Chief Executive Charles Prince that he expects to "return to a more normal earnings environment" during the fourth quarter put investors more at ease.

And, since analysts have stated the financials need to advance for the overall market to advance, a rally in bank and brokerage stocks was greeted with enthusiasm. Citigroup shares rose $1.29, or 2.8 percent, to $47.96. Easing jitters about subprime mortgages also lifted Countrywide Financial Corp. 91 cents, or 4.8 percent, to $19.92.

UBS, the largest Swiss bank, rose $1.70, or 3.2 percent, to $54.95 after warning it would take a pretax loss of up to $690 million in the quarter and cut 1,500 jobs. Rival Credit Suisse Group (CS) rose $1.61 to $67.94 after it said it expects to report a third-quarter profit of about $860 million despite stormy conditions.

Homebuilding stocks — another group that has been hard hit in recent weeks — spiked after several big players in the sector were upgraded by Citigroup. The report said large-cap builders with stronger balance sheets should benefit in the coming quarters.

Lennar Corp. (LEN) rose 77 cents, or 3.4 percent, to $23.42; D.R. Horton Inc. (DHI) added 58 cents, or 4.5 percent, to $13.39; and Pulte Homes Inc. (PHM) was up $1.14, or 8.4 percent, at $14.75.

Hope that acquisition activity would rebound from a sluggish third quarter got a boost when Nokia said it would buy Navteq. The deal is the first announced during the fourth quarter. During the third quarter, there was $992.1 billion worth of deals during the third quarter — down 43 percent from the second quarter, according to data tracker Dealogic.

Nokia shares were unchanged at $37.93, while Navteq fell $1.65, or 2.1 percent, to $76.32. The stocks of acquiring companies tend to fall after takeover announcements amid concerns that a deal might burden the purchaser with debt.

The Russell 2000 index of smaller companies was up 17.21, or 2.14 percent, at 822.46.

Advancing issues led decliners by a 3 to 1 basis on the New York Stock Exchange, where volume hit 775.9 million shares.

Overseas, Britain's FTSE 100 rose 0.61 percent, Germany's DAX index rose 0.77 percent, and France's CAC-40 added 1.01 percent. In Asia, Japan's Nikkei stock average closed up 0.36 percent, while the market was closed in Hong Kong for a holiday.