NEW YORK (CNN/Money) -
Receding oil prices and a slew of economic reports pointing to a strong recovery unleashed a bull run Wednesday.
The Dow Jones industrial average (up 162.20 to 10,590.22, Charts) and the broader Standard & Poor's 500 index (up 17.55 to 1,191.37, Charts) jumped 1.6 percent and 1.5 percent, respectively.
The Nasdaq composite index (up 41.42 to 2,138.23, Charts) scored the biggest gains, advancing nearly 2 percent.
"This is the strongest we've seen in quite a while. People are looking forward to a good November-December market," said Robert Drust, managing director of listed trading at Wedbush Morgan.
"I think that the crude gave people an excuse to put the money away soon rather than later."
Larry Wachtel, senior vice president and market analyst for Wachovia Securities, also pinned the session's strong performance on lower oil prices and economic news, but noted that there were less obvious reasons for the stock market rally.
"This is the first day of the month, you may have seen some end-of-the-month portfolio selling dissipating," Wachtel said. "And this is the day that Microsoft is distributing $33 billion in cash, so there is some anticipation of that finding its way back to the market."
Oil traders took note early in the session of a report from the Energy Information Administration (EIA) showing that U.S. oil inventories rose. U.S. crude futures retreated $3.64 to $45.49 a barrel on the New York Mercantile Exchange, the biggest one-day decline since Sept. 24, 2001. Brent oil futures slipped $3.40 to $42.07 a barrel in London.
A key manufacturing report from the Institute for Supply Management also helped to set a positive tone early in the day. The manufacturing sector continued to expand in November, with the ISM index jumping to 57.8 from 56.8 in October. Economists had predicted a reading of 57, according to Briefing.com. A number above 50 signifies growth in the sector.
Also, consumer spending surged 0.7 percent in October, the Commerce Department said, well ahead of Wall Street's predictions for a 0.4 percent increase.
Personal income rose 0.6 percent to its largest one-month gain since May and was slightly above consensus estimates for a 0.5 percent increase. Analysts' estimates for both numbers were compiled from Briefing.com.
And in a separate report, the Commerce Department said construction spending in October was relatively flat -- though still at record high levels -- as government spending compensated for a decline in residential development.
The Federal Reserve's own beige book, a snapshot of the current economic climate compiled by its regional banks, said the economy is moving along at a reasonable clip, thanks in part to an improving labor market.
Analysts say the day's news only confirms that the Fed will raise rates by at least 25 basis points when its policymaking Federal Open Market Committee (FOMC) arm meets on December 14.
Peter Cardillo, chief market analyst for SW Bach, foresees a 25 basis point increase in December and again sometime in the first-quarter. A weaker dollar, however, may spark the need for a more aggressive stance by the central bank as it tries to stave off inflation.
"If the dollar continues to fall, and we end up in a free fall, at one point the Fed will have to be more aggressive," Cardillo added. "They may have to respond by raising interest rates by half a point."
Wednesday's movers
General Motors (up $0.15 to $38.74, Research) was little changed after announcing that November vehicle sales skidded 13 percent and that first-quarter product will ease 7.1 percent in North America. Rival Ford (down $0.04 to $14.14, Research) was also little changed after making a similar announcement.
Software titan Microsoft (up $0.44 to $27.25, Research) picked up 1.6 percent ahead of its $33 billion pay out to shareholders.
IBM (up $1.64 to $95.88, Research) advanced 1.7 percent on news it signed two separate outsourcing deals with Danish companies Maersk Data and Danske Bank worth more than $1 billion.
Wal-Mart (up $0.76 to $52.82, Research) shares reversed their downward spiral, recouping 1.5 percent of its value, after having weighed on the Dow in the previous two sessions. Earlier this week, the No. 1 retail chain store slashed its November sales outlook.
The chip sector received a boost from Novellus Systems and Fairchild Semiconductor as both companies told Wall Street they could expect some favorable fourth-quarter numbers.
Novellus Systems (up $1.41 to $28.35, Research) said late Tuesday that its fourth-quarter results would be at the high end of its previous guidance, lifting the chip equipment maker's shares 5.2 percent.
Fairchild Semiconductor predicted its fourth-quarter revenue would only be down some 5 percent from the preceding quarter, versus an earlier forecast calling for a 5 to 10 percent decline. The chip maker's gross margins, however, were expected to be at the lower end of its guidance due to pricing pressure.
Still, Fairchild (up $1.40 to $16.70, Research) shares climbed 9.2 percent and pulled No. 1 chip maker Intel (up $0.72 to $23.10, Research) 3.2 percent higher a day ahead of its fourth-quarter update.
Advanced Micro Devices (up $1.33 to $22.61, Research) leapt 6.3 percent on news that the Sunnyvale, Calif.-based chip maker grabbed 8 percent of the market in the third quarter, its highest level in about three years.
The Philadelphia Semiconductor index (up $16.22 to $440.09, Research) clocked a 3.8 percent gain thanks to strength in the sector.
Entertainment and media conglomerate Walt Disney (up $0.80 to $27.68, Research) jumped nearly 3 percent on confirmation that Calpers President Sean Harrigan is headed for the door. Calpers, an acronym for the California Public Employees' Retirement System, is the nation's largest pension fund, and Harrigan had used the fund's weight to campaign for the ouster of Disney CEO Michael Eisner.
In the small- and mid-cap sector, GeoPharma (up $2.38 to $6.81, Research) was one of the Nasdaq's leading gainers -- soaring above 53.7 percent -- on news the Food and Drug Administration approved a drug used to treat mucositis, or mouth inflammation.
Market breadth was positive in lively trading. On the New York Stock Exchange, advancers beat decliners by about 23 to 10 on volume of 1.77 billion shares. On the Nasdaq, winners topped losers by 21 to 10 as 2.29 billion shares traded.
Treasury prices fell, lifting the benchmark 10-year Treasury yield to 4.36 percent, up from 4.35 percent late Wednesday. Bond prices and yields move in opposite directions.
The dollar was slightly lower against the yen and euro, although the greenback eased off another record low versus the single European currency touched earlier in the session.
In the commodities market, gold gained $2.70 to $453.20.
Asian-Pacific stocks finished lower, with Tokyo's Nikkei giving up 1.1 percent. European indexes finished higher. (Check the latest on world markets).
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