NEW YORK – Investors grew more upbeat about the economy Monday after retail sales rebounded more than expected in October on higher auto sales.

The stock market's gains followed advances overseas propelled by a weakening dollar and stronger gold prices, which boosted commodities and shares of companies that produce raw materials.

Major stock indexes rose more than 1 percent, including the Dow Jones industrial average, which advanced 125 points.

The Commerce Department said retail sales rose 1.4 percent in October, easily surpassing the 0.8 percent increase forecast by economists polled by Thomson Reuters. It was a sharp rebound following the 2.3 percent drop in September. Excluding the gain from autos, however, sales rose just 0.2 percent, half of what economists predicted.

Jamie Cox, a managing partner at Harris Financial Group, said the sales growth was a good sign heading into the holiday shopping season, especially because the data were not affected by factors such as sales tax holidays and government stimulus programs that had been present in the preceding months.

In midmorning trading, the Dow rose 126.29, or 1.2 percent, to 10,396.76. The Standard & Poor's 500 index rose 16.53, or 1.5 percent, to 1,110.01, while the Nasdaq composite index rose to 28.76, or 1.3 percent, to 2,196.64.

General Motors Co. said it lost $1.2 billion in the period since emerging from bankruptcy and the end of the third quarter on Sept. 30. Despite the loss, GM said it will begin to repay $6.7 billion in government loans and was seeing a stabilization in its business.

Home improvement retailer Lowe's Cos. reported lower profits that matched analysts' expectations and said it was seeing stabilization in some of the hardest hit housing markets. The company's shares rose 24 cents, or 1.1 percent, to $22.09.

Investors will get more insight into consumer spending as other retailers including Home Depot Inc., Target Corp. and TJX Cos. report earnings Tuesday.

Cox said the wide range of retailers reporting earnings during the week will provide insight into whether shoppers are willing to step up their spending and move back toward more expensive goods. Investors will be carefully parsing any updated outlooks from the companies ahead of the holiday shopping season.

The stock market is coming off a strong week, which added more than 2 percent to major indexes. On Friday the market was buoyed by encouraging earnings reports and outlooks from major retailers Abercrombie & Fitch Co. and J.C. Penney Co. as well as The Walt Disney Co.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite to its price, fell to 3.40 percent from 3.42 percent late Friday.

The dollar mostly fell against other major currencies, while gold prices rose to another record. Gold rose $11.50 to $1,129.20 an ounce after reaching a record of $1,133.50.

Crude oil rose $1.63 to $77.98 per barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies rose 11.70, or 2 percent, to 597.98.

Overseas, Japan's Nikkei stock average rose 0.2 percent. In afternoon trading, Britain's FTSE 100 rose 1.4 percent, Germany's DAX index gained 1.3 percent, and France's CAC-40 rose 1.2 percent.

By STEPHEN BERNARD and TIM PARADIS, AP Business Writers