Updated from 4:04 p.m. EDT

Stocks in the U.S. started the fourth quarter with big gains Monday, as traders shook off news from banking giants Citigroup ( C) and UBS ( UBS) that the late summer credit market meltdown would slice into their results.

The Dow Jones Industrial Average gained 191.92 points, or 1.38%, to 14,087.55, a record close for the blue-chip index. The Dow was last above the 14,000 level on July 19, the only time it had ever finished above that mark.

Among the Dow's 30 components, Verizon ( VZ), McDonald's ( MCD) and Hewlett-Packard ( HPQ) were the best performers, climbing at least 2.4%.

Elsewhere, the S&P 500 was up 20.29 points, or 1.33%, at 1547.04, and the Nasdaq Composite added 39.49 points, or 1.46%, to 2740.99.

Breadth was solidly positive to start the week. On the New York Stock Exchange 3.33 billion shares changed hands, as advancers topped decliners by a 3-to-1 margin. Volume on the Nasdaq reached 1.94 billion shares, with winners outpacing losers nearly 7 to 3.

The news of the day came from Citigroup, who said it was expecting third-quarter earnings to drop 60% from a year ago. The main culprit is a $3.3 billion hit to its securities and banking unit that's tied to the crisis that seized up the mortgage-securities market a few weeks back.

"Our expected third-quarter results are a clear disappointment," said Charles Prince, chairman and CEO of Citigroup. "The decline in income was driven primarily by weak performance in fixed-income credit market activities, write-downs in leveraged loan commitments, and increases in consumer credit costs."

Still, shareholders took the announcement in stride and hoped the worst might be over for the financials, with Citigroup finishing up $1.05, or 2.3%, to $47.72.

At Switzerland's UBS, the company is preparing to post its first quarterly loss in nine years due to its subprime exposure. UBS expects to book a charge of roughly $3.4 billion.

Even so, the stock closed higher by $1.69, or 3.2%, to $54.94.

Gains in Citigroup and UBS helped lead the financial sector higher. The Nasdaq Financial 100 Index rose 2.4%, the KBW Bank Index ended up 1.9%, and the NYSE Financial Sector Index added 1.8%.

"This market does have the ability to shrug off bad news because it wants to go higher," said Paul Mendelsohn, chief investment strategist with Windham Financial. "The general trend is up and there's very little concern. Even the financials are up despite negative news. This market is climbing the proverbial wall of worry."

Homebuilders were also among the day's winners after Citigroup upgraded Centex ( CTX), Lennar ( LEN), Pulte Homes ( PHM), D.R. Horton ( DHI) and Ryland Group ( RYL) to buy from hold, as the firm thinks a near-term bounce is due.

Each of the homebuilders rose between 2.7% and 8.7%, boosting the Philadelphia Housing Sector Index by 2.9%.

On the tech side, Nokia ( NOK) reversed early weakness and finished slightly higher after saying it would pay more than $8 billion for Navteq ( NVT), a maker of digital maps for navigation systems and devices. The deal values Navteq at $78 a share. Shares of Nokia tacked on 3 cents to $37.96.

In the first economic report of a busy week, the Institute for Supply Management said its manufacturing index for September fell to a reading of 52.0. That was down from 52.9 in August, and was a slightly greater decline than expected.

Later this week, the economic docket will bring the ISM services index, jobless claims, factory orders and the ever-important nonfarm payrolls report.

Paul Nolte, director of investments with Hinsdale Associates, said that because last month's jobs report was so weak, investors will be watching the number for September very closely "for signs that we are either entering or on the cusp of a recession. For many, two consecutive months of a decline in nonfarm payrolls is a sure indication of recession."

Nolte adds that the report should either provide fuel for further rate cuts by the Federal Reserve or signal that the central bank was premature in cutting by a bigger-than-expected 50 basis points last month. "Either way, we are looking forward to an interesting week," he said.

Marc Pado, U.S. market strategist with Cantor Fitzgerald, agreed that the focus of the week will be on the employment data, and he believes economists are a bit apprehensive to be too bullish about jobs.

"Given the solid weekly claims numbers, we would be hoping for a positive revision to August," he said.

Stocks closed out a busy third quarter on Friday with slight losses following a slew of economic data. The Dow lost 17.31 points, or 0.12%, at 13,895.63. The S&P 500 was off 4.63 points, or 0.3%, at 1526.75, and the Nasdaq was 8.09 points, or 0.3%, lower at 2701.50.

U.S. Treasury securities rallied. The 10-year note rose 5/32 in price to yield 4.57%. The 30-year bond was up 16/32 in price, yielding 4.80%.

Commodities ended lower for the day. The front-month November crude contract sank $1.42 to $80.24 a barrel. Meanwhile, gold and silver futures were also went out with losses.

Overseas markets were mostly higher. In Asia, Japan's Nikkei 225 rose 0.4% overnight. In Europe, London's FTSE 100 was up 0.6%, and Germany's Xetra Dax advanced 0.8%.

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