Banner day for the Dow

NEW YORK (CNNMoney.com) -- The Dow soared about 280 points to a record close Thursday, posting its biggest gain in nearly 5 years, on a flurry of takeover activity and some upbeat retail sales numbers.

The Dow (up 283.86 to 13,861.73, Charts) surged nearly 284 points, or 2.1 percent, its biggest one-day point gain since October 15, 2002, when the Dow climbed more than 378 points.

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The broader S&P 500 (up 28.94 to 1,547.70, Charts) also finished in record territory after climbing 1.9 percent, eclipsing its prior record hit June 4.

The tech-laden Nasdaq (up 49.94 to 2,701.73, Charts) followed, soaring about 1.9 percent on the day.

A bout of merger activity helped send stocks higher as mining giant Rio Tinto (down $6.71 to $317.71, Charts) said it agreed to buy Alcan in a deal valued at $38.1 billion that would create the world's largest aluminum producer and thwart Alcoa's hostile bid for the Canadian company.

"People were talking about M&A being dead, but it's not dead - we had a good old fashioned bidding war for Alcan," said Todd Clark, director of stock trading at Nollenberger Capital Partners Inc. in San Francisco.

Alcan (up $8.85 to $98.45, Charts) shares jumped nearly 10 percent on the New York Stock Exchange. Alcoa (up $2.86 to $45.29, Charts, Fortune 500) stock also jumped - it was the biggest gainer in the Dow, up nearly 7 percent - on bets that it may too get bought out.

In other takeover news, Apollo Management's Hexion Specialty Chemicals said it agreed to buy chemical maker Huntsman in an all-cash deal worth $6.5 billion. Huntsman (down $1.18 to $26.39, Charts, Fortune 500) shares, however, fell over 4 percent on the New York Stock Exchange.

Some better than expected retail sales readings for June provided a big boost for stocks as the consensus on Wall Street was the numbers would disappoint.

Wal-Mart delivered some impressive results, reporting that same-store sales rose 2.4 percent, almost three times higher than forecasts. Wal-Mart (Charts, Fortune 500) shares climbed over 2 percent on the news.

Shares of American Eagle Outfitters (Charts) jumped over 6 percent after the teen clothing retailer posted a strong 8 percent jump in its June sales, beating expectations for a 4.4 percent gain.

"Consumer are still spending so that was something for people to hang their hats on," said Hugh Moore, founder and partner at Guerite Advisors.

Macy's (Charts) said its sales fell more than expected by 2.7 percent in June, sending its shares nearly 3 percent lower.

The S&P Retail Index climbed 2.3 percent.

Based on individual issues, all of the Dow 30 components were higher, with Intel Corp. (Charts, Fortune 500), American Express (Charts, Fortune 500) and Hewlett-Packard (Charts, Fortune 500) among the top gainers.

On the economic front, the trade gap widened in May, meeting economists' expectations, with much of the rising gap due to oil prices.

Weekly jobless claims fell more than expected to 308,000 last week, the Labor Department reported.

Oil prices retreated as U.S. light crude for August fell 6 cents to $72.50 a barrel on the New York Mercantile Exchange.

Treasury prices eased, taking the yield on the 10-year note to 5.13 percent from the 5.09 percent level reached late Wednesday. Bond prices and yields move in opposite directions.

The dollar eased slightly against the euro after sliding to record lows in the previous two sessions. The dollar edged higher versus the yen.

COMEX gold for August climbed $6.20 to $668.30.

Market breadth was positive. Advancers topped decliners on the New York Stock exchange by nearly 2 to 1 on volume of 1.66 billion shares. Winners beat losers on the Nasdaq by more than 2 to 1 on volume of 2.14 billion shares.