NEW YORK (CNN/Money) - Stronger-than-expected retail sales data helped propel the Dow Jones industrial average to its highest finish in more than a month Wednesday as signs of economic stability doused some investors' accounting fears.
Gains in financial, retail and technology shares brought the Dow within 11 points of 10,000 -- underscoring the market's standstill. Nearly three years after first closing with five digits, the blue-chip indicator has made no lasting progress.
The Dow gained 125.93 points, or 1.3 percent, to 9,989.67 Wednesday, its best finish since Jan. 10. The Nasdaq composite index rose 24.95, or 1.4 percent, to 1,859.16, its highest close since Feb. 1. And the Standard & Poor's 500 index added 11.01 to close at 1,118.51, also the second-best finish of the month.
The market's third gain in four session came after the Commerce Department said retail sales excluding auto purchases rose 1.2 percent in January, well above forecasts for a 0.3 percent gain.
"The retail sales number today reinforces the notion that the consumer hasn't fallen apart," said Ned Riley, chief investment strategist at State Street Global Advisors. "Today's market is encouraging from the perspective that there is less of an Enron hangover."
Still, Riley says the economic recovery may not be as robust as some expect, keeping the stock market stuck in its rut.
A handful of stronger-than-expected quarterly profit reports also helped Wednesday. Both chip equipment maker Applied Materials and Network Appliance, which makes data storage systems, topped Wall Street's earnings targets.
More stocks rose than fell. On the New York Stock Exchange, advancers led decliners by a nearly 2-to-1 margin as 1.1 billion shares changed hands. Winners beat losers 3-to-2 on the Nasdaq, with volume at 1.5 billion shares.
In other markets, Treasury securities edged lower. The dollar rose against the euro and yen. Gold futures, which have risen in recent weeks due to the uncertainty created by the Enron scandal, declined. Oil prices rose.
Retail sales surge
Retail sales excluding vehicle purchases saw the biggest monthly boost since March 2000, the month the Nasdaq peaked above 5,000. Sales including cars and trucks slipped 0.2 percent.
"Individuals may simply believe that the economy has turned and are acting accordingly," said Mike Moran, chief economist at Daiwa Securities, who suspects that the worst fears about terrorism and job losses are easing.
Sales at gas stations, apparel stores and home and garden centers fueled the gains even as auto dealers were unable to keep luring buyers with interest-free loans.
The report comes amid other signs of economic stability. The pace of new claims for jobless benefits has slowed in recent months. Business inventories are falling, suggesting orders for new goods will pick up. And consumer confidence, which tumbled after the Sept. 11 terrorist attacks, is on the mend.
The Federal Reserve cast its own vote of economic confidence last month when policy makers held steady on borrowing costs following 11 interest rate cuts last year.
One of the Dow's biggest gainers, Johnson & Johnson (JNJ: up $0.79 to $58.09, Research, Estimates), said it will buy back as much as $5 billion of its stock, which is trading near its 52-week high of $60.97.
Among other Dow stocks, Home Depot (HD: up $0.93 to $51.24, Research, Estimates), the No. 1 home improvement retailer, said NYSE Chairman Richard Grasso has been appointed to its board of directors. The company also said it will phase out sales of lumber treated with the preservative chromated copper arsenate, which some scientists believe is a cancer risk to children using decks and playgrounds made of the wood.
Fahnestock & Co. upgraded General Motors (GM: up $2.13 to $51.20, Research, Estimates) to "strong buy" from "buy" while Merrill Lynch raised the automaker's profit targets.
Dow gainers also included financial stocks such as American Express (AXP: up $1.02 to $34.01, Research, Estimates) and tech issues including IBM (IBM: up $1.50 to $108.07, Research, Estimates).
After the closing bell, Hewlett-Packard's (HWP: up $0.21 to $20.98, Research, Estimates) the computer maker, which is trying to buy Compaq Computer (CPQ: up $0.28 to $11.40, Research, Estimates), said its fiscal first-quarter profit fell to 29 cents per share. But that beat Wall Street's forecast by 4 cents per share.
After first closing above 10,000 in March 1999, the Dow went on to rise above 11,700 a year later, only to fall below 8,300 the week after the Sept. 11 terrorist attacks.
Applied for advance
Nasdaq's third-most active stock, Applied Materials (AMAT: up $3.25 to $47.96, Research, Estimates), posted a 2-cent-per-share profit in its fiscal first quarter, surprising analysts who were looking for breakeven results. The company also said it expects orders to improve in the current quarter.
Network Appliance (NTAP: up $2.89 to $19.34, Research, Estimates) earned 4 cents per share in the fourth quarter, double Wall Street forecasts. Gains spread to rival data storage company EMC (EMC: up $0.49 to $14.49, Research, Estimates).
The sixth-biggest gainer on the NYSE, Office Depot (ODP: up $2.30 to $18.49, Research, Estimates), raised its earnings forecast for 2002 after the office supply retailer posted better-than-expected quarterly profit.
But Marriott International's (MAR: up $2.46 to $39.36, Research, Estimates) profit missed forecasts in the fourth quarter, with earnings excluding items falling to 22 cents per share as the hotel business suffered.
The advertising slowdown hit Viacom (VIA: up $0.25 to $43.41, Research, Estimates). The media company that runs CBS said it had an operating loss of $140, or 8 cents a share, in the fourth quarter, narrower than expected.
For stocks, Wednesday's was only the third higher finish of the month. But those gains have been explosive. The Dow combined for a 364-point surge over those three sessions.
Still, the market has made no real progress since November amid worries about accounting accuracy in the wake of the Enron affair and the strength of any profit rebound.
"I think we are going to continue to have this cloud hang over us," Mark Donahoe, equity trader at U.S. Bancorp Piper Jaffray, told CNNfn's Halftime Report.
That cautiousness, common these days, counters the euphoria surrounding the Dow's first close above 10,000 in 1999, which capped years of big gains.
"It is a different world," State Street's Riley said. 
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