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NEW YORK (CNN/Money) -
Stocks surged Tuesday as falling oil prices and signs of a recovering economy fired up a broad-based rally.
As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to a flat open for stocks Wednesday.
The Dow Jones industrial average (up 141.87 to 10,589.24, Charts) jumped about 1.4 percent, while the Nasdaq composite (up 25.79 to 2,166.86, Charts) and the Standard & Poor's 500 (up 15.37 to 1,233.39, Charts) index both climbed 1.2 percent.
U.S. light, sweet crude oil for October delivery slumped $1.61 to $65.96 a barrel on the New York Mercantile Exchange -- back below where prices were before Hurricane Katrina sent energy prices soaring last week.
The drop in oil prices sparked gains in various stock sectors, especially those that are economically sensitive.
Falling Treasury bond prices added to the gains, with investors pulling money out of the "safe haven" of bonds and putting it into stocks.
An upbeat read on the services sector of the economy, released in the morning, added to the day's momentum.
Oil prices began to slide over the weekend as other nations began to release emergency reserves. On Friday, the International Energy Agency said the governments of 26 countries had agreed to release around 60 million barrels of oil over the next month.
In addition, some of the refineries along the Gulf Coast shut by Hurricane Katrina prepared to reopen.
Falling oil prices notwithstanding, the considerable devastation wrought by Katrina has led many economists to suggest that the Federal Reserve may pause after its 14 month rate-hiking campaign, perhaps as soon as later in the month.
"It's increasingly believed among participants that the Fed will skip the next meeting, and possibly one more by the end of the year," said Jack Ablin, chief investment officer at Harris Trust.
"At the same time, you have the economically-sensitive issues leading the rally today, which suggests that perhaps the economy is better off than has been feared," he added.
While oil and the Fed were the main drivers, upbeat corporate news played a role in the day's advance, too, said Art Hogan, chief market analyst at Jefferies & Co. He noted that there was some "positive buzz about Intel's mid-quarter update later in the week."
Intel (up $0.42 to $25.70, Research)'s update is expected Thursday after the close of trade. Texas Instruments (up $0.67 to $33.17, Research) also issues its update the same day.
Wednesday's potential market movers include the weekly oil inventory report, due mid morning, and the Fed's "beige book," due in the afternoon. The beige book survey of the central bank's 12 districts is used in making the decision about short-term interest rates.
What moved?
Gains were broad based, with 28 out of 30 Dow issues rising.
Home Depot (up $1.38 to $41.71, Research) was the Dow 30's biggest advancer, rising 3.4 percent. The home improvement retailer -- along with rival Lowe's (up $2.21 to $66.46, Research) -- jumped on bets that reconstruction efforts following the hurricane will help business.
Banc of America Securities upgraded Dow component Coca-Cola (up $0.62 to $44.52, Research) to "buy" from "neutral," sending shares higher.
Airlines, railroads and other modes of transportation benefited from the retreat in crude oil prices, pushing the Dow Jones Transportation Average (up 36.46 to 3,689.01, Charts) up 1 percent.
Lehman Bros. upgraded Cisco Systems (up $0.48 to $18.20, Research) to "overweight" from "equal weight." The stock added more than 2 percent.
Albertson's (up $0.35 to $23.40, Research) rose for the second session after CIBC World Markets upgraded the grocery chain. On Friday, the stock jumped after the company said it was considering putting itself up for sale, amid increased competition.
Protein Design Labs (up $2.99 to $29.92, Research) jumped 11 percent in unusually active Nasdaq trade after reporting over the weekend that its heart failure treatment worked well in a Phase 2 trial.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by more than eleven to five on volume of 1.42 billion shares. On the Nasdaq, advancers topped decliners by two to one on volume of 1.44 billion shares.
Treasury prices slipped, raising the yield to 4.08 percent from 4.03 percent late Friday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar gained versus the euro and the yen.
COMEX gold rose 10 cents to settle at $448.60 an ounce.
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