* ISM manufacturing growth tops expectations
* Chesapeake to replace McClendon as chairman
* Indexes up: Dow 0.9 pct, S&P 1.1 pct, Nasdaq 1.1 pct
By Angela Moon
NEW YORK, May 1 (Reuters) - U.S. stocks rallied on Tuesday and the Dow hit its highest level since December 2007, after data showed the U.S. manufacturing sector expanded at a faster pace than expected in April, easing jitters about a slowdown in the economic recovery.
With most markets in Europe and several major Asian markets closed for the May Day holiday, investors shifted their attention to U.S. economic data.
Data from the Institute for Supply Management showed growth in U.S. manufacturing came in its strongest rate in 10 months in April, suggesting the economy remains resilient after indications it had lost momentum at the start of the second quarter.
"'Sell in May'" is a valuable seasonal strategy when confirmed by our indicators. However, weakness in the measures we monitor, although growing, has not progressed to the point that they support a bearish outlook as they did in May 2011," said Ari Wald, technical analyst at Brown Brothers Harriman.
"For now we believe a balanced approach is most appropriate due to the lack of full confirmation in either direction."
The Dow Jones industrial average was up 113.18 points, or 0.86 percent, at 13,326.81. The Standard & Poor's 500 Index was up 15.93 points, or 1.14 percent, at 1,413.84. The Nasdaq Composite Index was up 34.12 points, or 1.12 percent, at 3,080.48.
The Dow earlier rose to as high as 13,338.66 points.
The S&P 500 in April posted its first monthly decline since November as economic data pointed to a slowing domestic economy and continued flare-ups in the euro zone highlighted the risks of the region's debt crisis.
According to Thomson Reuters data through Tuesday morning, of the 321 S&P 500 companies that have reported quarterly results so far, 71.3 percent have topped estimates.
Earnings are expected from 32 S&P 500 companies on Tuesday, including Broadcom Corp, Chesapeake Energy Corp and Fiserv Inc.
Chesapeake, the nation's No. 2 natural gas producer, climbed 8.1 percent to $19.92 after it said it will name an independent, non-executive chairman to replace Aubrey McClendon. The company will also end a controversial program that has granted McClendon minority stakes in Chesapeake's wells.
BP Plc's profit dropped on a fall in production prompted by the sale of oil fields to pay for the Gulf of Mexico disaster. U.S.-listed shares of BP fell 1 percent to $42.96.
Huntsman Corp jumped 12.6 percent to $15.94 after profit nearly tripled on higher prices for its chemicals.
Health-care stocks rose, boosted by Molina Healthcare Inc , which advanced 5.5 percent to $27.07 after the company's earnings topped estimates.
The Morgan Stanley healthcare payor index gained 2.3 percent.
PF Chang's China Bistro Inc surged nearly 30 percent to $51.40 after the restaurant chain agreed to be bought by a private equity firm.