NEW YORK (CNNMoney.com) -- Stocks surged Wednesday afternoon, with the Dow Jones industrial average closing at its highest point ever, the S&P 500 hitting a 5-1/2 year high and the Nasdaq composite rising more than 2 percent.

The Dow industrials (up 123.27 to 11,850.61, Charts) added 1.1 percent, according to early tallies. It hit a record trading high of 11,851.25 during the session, before closing just below that at 11,850.61.

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On Tuesday, the Dow had ended the session at a record closing high, taking out the record close from January 2000.

The S&P 500 (up 16.11 to 1,350.22, Charts) index climbed 1.2 percent, closing at its highest point since Feb. 2001.

The Nasdaq composite (up 47.30 to 2,290.95, Charts) jumped 2.1 percent.

Treasury prices rose, lowering the corresponding yields; the dollar gained versus other major currencies.

Oil prices gained and gold prices fell.

Here's a look at what was moving near the close.

Stocks opened with little fanfare, but soon turned higher, as investors welcomed mixed economic news and falling Treasury yields. The stock gains increased as the session wore on.

The advance may have been attributable to "performance chasing," said David Briggs, head of equity trading at Federated Investors. He was referring to the tendency that when the major gauges take out previous highs, it can cause investors to want to pile in, for fear of missing out.

"It's amazing to me how all the bad news has disappeared," he added. "News on the weakening economy is seen as positive, because it means the Fed is done."

He said that while the momentum is positive now, investors shouldn't be surprised if there's a substantial pullback later in the fourth quarter or early next year.

The day's economic reports served to further bets that the economy is slowing, but not heading for recession, and that the Federal Reserve will not have to raise rates again. That sent bond prices rallying and the corresponding yields tumbling.

Afternoon comments from Federal Reserve chairman Ben Bernanke proved reassuring as well. Bernanke said that the housing market slowdown will cut into GDP growth both this year and next. However, he also said that continued low mortgage rates and the strong job market will help take the edge off the housing slowdown.

"It's encouraging to see the Dow hitting all-time highs," said Michael Sheldon, chief market strategist at Spencer Clarke. "It partly reflects the rotation in the market that we've seen over the last few months with large cap stocks starting to outperform small cap stocks, at least in the U.S."

He added though that odds are growing of a short-term correction or bout of profit taking kicking in, due to a variety of technical market indicators.

August factory orders were unchanged, after falling a revised 0.6 percent in the previous month. Economists surveyed by Briefing.com thought orders would fall 0.2 percent.

The Institute for Supply Management's September read on the services sector of the economy fell to 52.9, below forecasts for a drop to 56 from the 59 level hit in August.

U.S. light crude oil for November delivery rose 83 cents to $59.51 a barrel on the New York Mercantile Exchange, gaining after hitting a 7-month low on Tuesday. Oil prices had initially see-sawed following a mixed weekly oil inventories report released in the morning.

However, the turnaround in oil did not unsettle investors and instead sparked a recovery in the recently-battered oil stocks, including Exxon Mobil (up $1.20 to $66.61, Charts).

A variety of computer hardware, computer software and Internet shares gained, lifting the Nasdaq.

Biotech, bank, healthcare and telecom stocks gained too, supporting the broader market.

Among Dow issues, 27 out of 30 stocks gained, led by IBM (up $1.45 to $83.10, Charts), Microsoft (up $0.57 to $27.94, Charts) and Altria (up $1.26 to $76.90, Charts).

Dow stock General Motors (down $0.09 to $33.32, Charts) recovered from earlier losses, managing small gains following reports that the automaker's talks with Renault-Nissan about an alliance have been terminated.

Dow component Wal-Mart Stores (Charts) dipped after revising its September same-store sales numbers lower. Earlier in the week, the retailer said sales at stores open a year or more had risen 1.8 percent, but now it says the correct number is 1.3 percent, near the low end of the range it initially gave investors.

Another Dow stock, aluminum maker Alcoa, also declined, falling in tune with the broader selloff in metals.

COMEX gold for December delivery fell $15 to $566.50 an ounce, after slumping more than $22 yesterday.

That sent gold stocks lower, with the Amex Gold Bugs (up $2.86 to $285.53, Charts) index losing 2.6 percent.

Valero Energy (up $1.93 to $50.10, Charts) rose after saying late Tuesday that it expected to report record third-quarter earnings-per-share of $2.25 to $2.35. The range was below analysts' estimates, but investors focused on the record and pushed shares higher Wednesday.

Market breadth was positive. On the New York Stock Exchange, winners beat losers three to one on volume of 1.85 billion shares. On the Nasdaq, advancers topped decliners by more than two to one on volume of 2.23 billion shares.

Treasury prices rallied, lowering the yield on the 10-year note to 4.57 percent from 4.61 percent late Monday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar gained versus the euro and the yen.

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