Dow hits new record

NEW YORK (CNNMoney.com) -- Stocks rallied Tuesday, with the Dow posting a new record close, as investors welcomed upbeat news from Wal-Mart Stores and Intel, lower oil prices and a big drop in a key measure of inflation.

The Dow Jones industrial average (up 89.65 to 12,221.53, Charts) gained 0.7 percent, according to early tallies, closing at its highest point ever. The blue-chip barometer also hit a record trading high near the close.

The broader S&P 500 (up 8.89 to 1,393.31, Charts) index gained 0.6 percent and ended at its highest point since November 2000.

The tech-fueled Nasdaq composite (up 24.21 to 2,430.59, Charts) added 1 percent and ended at its highest point since February 2001.

Treasury prices rallied, lowering the corresponding yields. The dollar weakened versus other major currencies.

Oil and gold prices slipped.

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

Stocks slipped in the morning as investors considered the implications of the day's economic news, as well as earnings from Wal-Mart Stores, Home Depot and others.

But the tone improved in the afternoon, with a variety of sectors bouncing back.

The turnaround was impressive and a bit surprising, said Ron Kiddoo, chief investment officer at Cozad Asset Management. He said it reflected the market's resilience, with investors unwilling to dwell too long on any perceived negatives, like the morning's retail sales report or some of the day's earnings.

"We're seeing the same trend today we've been seeing lately, where stocks start off lower on whatever the bad news is, but turn it around by the afternoon," Kiddoo said.

He said this reflects the fact that long term factors still support more stock gains, thanks to positives like strong earnings and an economy that seems to be slowing, but not heading for a so-called "hard landing."

Tuesday kicked off a busy week for economic reports.

The Producer Price index (PPI) fell a greater-than-expected 1.6 percent in October, the government reported Tuesday morning.

So-called "core" PPI, which excludes volatile food and energy costs, fell 0.9 percent, surprising economists who thought it would rise 0.1 percent, on average. Core PPI rose 0.6 percent in September.

The decline in core PPI was the largest slump in more than 13 years and took the edge off any worries about inflationary pressure.

Retail sales fell 0.2 percent in October, the government reported Tuesday, due mostly to lower gas prices. Sales fell 0.4 percent in the previous month. Economists surveyed by Briefing.com thought sales would fall 0.4 percent again.

Sales excluding autos fell a greater-than-expected 0.4 percent in October.

The larger picture that investors can draw from these two reports is modest consumer spending and moderate core inflation, said Joshua Shapiro, chief economist at Maria Fiorini Ramirez Inc.

"The reports suggest that things are moving in the way the Fed wants," he said. "Growth is slowing, but not slowing too rapidly and inflation pressures seem to be cooling."

The reports are consistent with the Federal Reserve keeping interest rates steady, Shapiro said, as board members have opted to do for the last three meetings following two years of rate hikes.

In response, prices in the inflation-sensitive Treasury bond market rallied, lowering the yield on the benchmark 10-year note to 4.57 percent from 4.61 percent late Monday. Bond prices and yields move in opposite directions.

In corporate news, Wal-Mart Stores (up $1.39 to $47.71, Charts) reported higher quarterly earnings that topped estimates, sending shares 3 percent higher.

Target (up $1.40 to $59.16, Charts) reported higher quarterly earnings that beat forecasts on sales that rose from a year ago and met forecasts, sending shares higher.

Home Depot (up $1.53 to $37.93, Charts) reported quarterly earnings that slipped from a year earlier and missed analysts' projections, reflecting the impact of the slowdown in the housing market.

The home improvement retailer also cut its forecast for earnings and sales growth in the fiscal year. After sliding modestly in the morning, shares moved higher in the afternoon.

A variety of retailers rose, lifting the S&P Retail (Charts) index by 2 percent.

Chipmaker Intel (up $0.88 to $21.88, Charts) jumped 3 percent after releasing its new quad-core chips ahead of rival AMD (up $0.16 to $21.36, Charts). The gain helped lift chipmakers and the computer hardware sector. AMD shares were little changed.

Shares of automakers rose after the conclusion of a meeting between President Bush and top executives from General Motors (up $0.36 to $35.45, Charts), Ford (down $0.08 to $8.79, Charts) and the U.S. arm of DaimlerChrysler (up $0.64 to $59.96, Charts).

Topics of discussion between the president and the executives included energy policy and the U.S. dollar.

Homebuilder D.R. Horton (up $2.08 to $24.46, Charts) reported quarterly earnings slumped amid a large decline in new home orders but the results topped analysts' estimates and shares surged.

A variety of homebuilders climbed, boosting the Dow Jones Home Construction (Charts) index by over 6 percent.

After the close Monday, retailer Dillard's (up $6.47 to $35.68, Charts) reported improved quarterly earnings that topped estimates. Shares rallied Tuesday.

A variety of blue chip stocks rose, with 26 out of 30 Dow components rising.

Market breadth turned positive. On the New York Stock Exchange, winners beat losers eleven to five on volume of around 1.35 billion shares. On the Nasdaq, advancers beat decliners by three to two on volume of 1.55 billion shares.

U.S. light crude oil for December delivery fell 30 cents to $58.28 a barrel on the New York Mercantile Exchange.

COMEX gold fell $2 to $623.80 an ounce.

In currency trading, the dollar fell versus the yen and was little changed against the euro.

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