* Bank of Japan to pump more funds into economy
* ISM services index climbs more than expected
* Materials, industrial shares lead broad rally
* Dow up 1.8 pct, S&P up 2.1 pct, Nasdaq up 2.4 pct (Updates to close)
By Leah Schnurr
NEW YORK, Oct 5 (Reuters) - U.S. stocks rallied to a nearly five-month high on Tuesday on growing conviction that central banks will do even more to boost struggling economies worldwide.
The Bank of Japan lit the fuse overnight when it unexpectedly cut rates closer to zero and said it would pour money into the markets through asset purchases. This move came as markets increasingly believe the U.S. Federal Reserve will stimulate the world's largest economy in a similar fashion.
"The thinking today is that the printing of money is going to take place," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
"The short-term impact of that is to drive asset prices higher. We've seen it almost across the board in commodities."
The likelihood of quantitative easing in the United States hit the greenback and lifted commodity prices, while resource stocks drove the S&P 500 through the 1,150 resistance level.
Crude oil hit a five-month peak near $83 a barrel and gold hit another record high at $1,341.20 an ounce. The materials sector led the S&P 500, gaining 2.8 percent, with mining company Freeport-McMoRan Copper & Gold jumping 4.6 percent to $91.21.
Growing expectations of another round of quantitative easing from the Fed have fueled enthusiasm for equities of late. A top Fed official said in an interview published on Tuesday that the central bank should do "much more" monetary easing to spur a sluggish economic recovery.
If the 1,150 level holds, the next resistance level for the S&P 500 is seen around 1,170 to 1,175.
"It started off being a round number and now it becomes more significant," said Frank Cappelleri, technical market analyst and trader at Instinet in New York.
"Over the past few months, the market has seemed to respect support and resistance more than before. So when one of those levels is taken out, it seems to hold more significance than it has in the past."
The Dow Jones industrial average gained 193.45 points, or 1.80 percent, to 10,944.72. The Standard & Poor's 500 Index rose 23.72 points, or 2.09 percent, to 1,160.75. The Nasdaq Composite Index jumped 55.31 points, or 2.36 percent, to 2,399.83.
The Bank of Japan set the positive tone early on after it cut its overnight rate target to virtually zero and pledged to buy 5 trillion yen ($60 billion) worth of assets in a fresh dose of economic stimulus.
Additionally, Australia's central bank left interest rates steady for a fifth month, thwarting expectations of a hike.
Wall Street added to gains after the Institute for Supply Management's index showed the pace of growth in the U.S. services sector accelerated more quickly than forecast in September, while hiring also picked up.
Industrial shares also ranked among the day's winners, with Dow components Boeing Co up 3.4 percent at $68.60, and Caterpillar Inc climbing 2.8 percent to $79.40.
Elsewhere, Walgreen Co gained 2.6 percent to $33.98 after the drugstore chain posted an unexpected increase in September same-store sales. (Reporting by Leah Schnurr: Editing by Jan Paschal)