Better news on retail sales and manufacturing helped send stocks higher Tuesday, as did comments fr om Federal Re serve Chairman Ben Bernanke that the recession was probably over.
Surging materials and industrial companies like Alcoa and Caterpillar pulled the Dow Jones industrial average to a gain of 57 points, its seventh climb in eight days and another high for the year. Manufacturers are expected to be among the early beneficiaries if the economy strengthens and demand picks up.
Hopes for a re bound grew after the government reported that retail sales jumped in August by the biggest amount in three years. The Fed's index of manufacturing in the New York region rose to its best level since late 2007.
Those doses of positive economic news helped allay concerns about a separate government report finding that inflation at the wholesale level rose last month at double the rate analysts expected.
Meanwhile, Bernanke cheered investors by saying that the worst recession since the 1930s has 'ver y likely" ended, though he cautioned that problems like high unemployment will remain.
Investors have been betting on a recover y. The S tandard & Poor's 500 index, the benchmark for many mutual funds, has surged 55.6% since skidding to a 12-year low in March.
Stocks zigzagged in morning trading before gaining steam in the afternoon, similar to the way trading played out Monday. Analysts say the slow-building gains are a sign that investors are pouncing on dips to get into the rally.
The short bouts of selling have meant the market has advanced without the sizable break, which many analysts still say is overdue. Even when the news isn't good,market sentiment seems immune to developments that would have punctured the rally only months ago.
Investors shrugged off news that wholesale prices rose 1.7% jump last month, and disappointing earnings from two major retailers, Best Buy Co and Kroger Co, also failed to push the stock market off course.
"You want to say that the market is a little bit tired after the run we've had yet we continue to grind higher,"said Ryan Larson, senior equity trader at Voyageur Asset Management.
The Dow rose 56.61, or 0.6%, to 9,683.41, its highest close since Oct 6, when it finished at 9,956.
The S&P 500 index rose 3.29, or 0.3%, to 1,052.63,while the Nasdaq composite index rose 10.86, or 0.5%,to 2,102.64. All three indicators are at their highest levels for 2009.
More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.5 billion shares compared with 1.2 billion Monday.
The government's report that retail sales jumped 2.7% in August boosted confidence in the economy.Analysts say improvements in consumer spending are crucial to a recovery.
Even after stripping out the sizable gains from the government's popular Ca sh for Clunkers program, sales rose 1.1%, well beyond the rise of 0.4% expected by analysts.
Commodity and industrial stocks rose as a weaker dollar pushed up mater ials prices. Alcoa Inc added $1.05, or 8.1%, to $13.99. Caterpillar Inc rose $2.93, or 6%, to $51.70.
Gregg S. Fisher, chief investment officer at financial advisory firm Gerstein Fisher in New York, said despite the recent gains investors could still run into trouble.
"Investors are always following the herd. I think investors should sort of catch themselves now and not get overconfident," he said.
The market's latest gains came one year after the Dow tumbled 500 points following the collapse of Lehman Brothers Holdings Inc, which deepened the recession.
In other trading, bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.46% from 3.43% late Monday.
Crude oil rose $2.07 to settle at $70.93 a barrel on the New Yo rk Mercantile E xchange. Gold also rose after the report on inflation. The metal is often used as a hedge against rising prices.
The Russell 2000 index of smaller companies rose 4.81, or 0.8%, to 604.84. AP
LONDON 5,042.13 +23.28
Britain's top share index rose for a third straight session on Tuesday to close up 0.5%, boosted by bullish economic data from the United States, as heavyweight oils, miners and banks underpinned the rally.
The FTSE 100 ended 23.28 points higher at 5,042.13,after trading as low as 4,996.52 earlier in the session.
In Frankfurt, the DAX index ended at 5,628.98 points, up 8.74 or 0.16%. In Paris, the CAC-40 index closed at 3,752.21 points, up 21.6 or 0.58%.
The UK index is up 45.7% since touching its March lows. However, it is still 6.9% below the level it was before the collapse of Lehman Brothers a year ago.
"Investors have digested the figures from across the pond and have plunged back in to this market and decided to run with this rally," said Jimmy Yates, Head of Equities at CMC Markets.
US retail sales rose at their fastest pace in threeand-half years in August as government-sponsored auto incentives buoyed demand for motor vehicles,according to data that showed sales outside the auto sector also were strong.
Meanwhile, US producer pr ices rose more than twice as much as expected in August on the biggest surge in gasoline prices in more than 10 years and prices declined less than expected compared with a year ago,a government report revealed..
The market also got a boost from US Federal Reserve Chairman Ben Bernanke who said the US economic recession was probably over but the recover y would be slow and take time to create new jobs.
Energy stocks we re higher, underpinned by a strengthening US dollar which rose against a basket of currencies and lifted crude, which hovered around $69 a barrel.
BP, Royal Dutch Shell and Cairn Energy gained 0.6-3.7%.
BG Group added 1.4% after unveiling another discovery in the Santos Basin concession, offshore Brazil.
Oil and gas explorer Tullow Oil, up 1.2%, also got an additional boost from bid speculation, with market chatter mentioning Italian ENI as a possible predator.Neither company commented on the rumour.
International Power was up 2.6% in a read across from news that China's sovereign we alth fund is eyeing a stake in US power company peer AES Corp.
Takeover speculation also saw Man Group climb 3.2%on rehashed bid rumours.
"It's no surprise that investors are once again targeting the usual suspects (miner, banks and oils). They're getting their bang for their buck," Yates said.
Banks were mixed. Royal Bank of Scotland, HSBC and Standard Chartered rose 1.3-1.4%, while Lloyds Banking Group and Barclays were 0.6 and 0.2% lower respectively.
Bank of England Governor Mervyn King said the central bank was looking at reducing the rate on commercial banks' reserves, fuelling speculation of further quantitative easing. The comments sent sterling lower.
Miners gained as metal prices rebounded from the previous session's lows. Fresnillo, Rio Tinto, Xstrata, BHP Billiton and Kazakhmys added 0.5-3.7%.
Also on the upside, BT Group rose 4.4%, buoyed by a Credit Suisse upgrade to 'outperform" from 'neutral' ,while precious metals and chemicals firm Johnson Matthey gained 3.2% following a Goldman Sachs upgrade.
Rexam fell 2.2% after Credit Suisse removed the drinks can maker from its Focus List, and technology firm Smiths Group shed 1.7% after Morgan Stanley cut its rating to "equal-weight".
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