Stocks post best gains since April

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NEW YORK (CNNMoney) -- U.S. stocks rallied Tuesday, with all three major indexes ending up more than 1%, following better-than-expected data on retail sales and inflation and Bernanke's call to Congress on the debt ceiling.

The Dow Jones industrial average (INDU) jumped 123 points, or 1%, with 80% of the blue-chip index's 30 components moving higher. A 4.5% jump in shares of Home Depot (HD, Fortune 500) led the advance. Caterpillar (CAT, Fortune 500) and Boeing (BA, Fortune 500) were also big gainers.

The S&P 500 (SPX) rose 16 points, or 1.3%, with shares of JC Penney (JCP, Fortune 500) soaring 17.5% after the department store chain named Apple retail executive Ron Johnson as its next CEO.

The Nasdaq Composite (COMP) gained 39 points, or 1.5%, with shares of Baidu (BIDU) and Green Mountain Coffee Roasters (GMCR) among the top winners.

All three major indexes posted their best performance since April 20.

The market's P/E is at a nine-month low - StockTwits

Bernanke said the United States would be forced to stop payments on some existing obligations, possibly including Social Security and Medicaid, if the debt ceiling is not raised.

Investors liked what they heard, with stocks holding onto their gains. Stocks rallied right from the get-go Tuesday, following a round of better-than-expected economic data.

Plus, the market has really taken a hit the last several weeks, dropping nearly 6% since the beginning of May. Matt King, chief investment officer at Bell Investment Advisors, said it's not surprising to see a rebound since "the market has gotten pretty oversold."

But will the rally last? Stocks had a strong one-day bounce last Thursday, too, after a six-session losing streak, but fell back into sell mode the next day.

On Monday, stocks started the week modestly higher following a series of corporate deals. But the gains were short-lived after credit agency Standard & Poor's downgraded its rating on Greece to "CCC."

Economy: The Commerce Department said retail sales slid 0.2% in May. While it was the first decline in 11 months, it was much less of a drop than economists had forecast.

The Labor Department issued a brighter report on the producer price index, also known as manufacturer inflation. The PPI rose 0.2% in May, slightly better than the 0.1% that economists had forecast.

Companies: Best Buy's (BBY, Fortune 500) stock surged nearly 7% in early trading, following fiscal first-quarter results that beat expectations. But investors pulled back as the session went on. Shares of the consumer electronics retailer finished up 4.6%.

Smartphone makers Apple (AAPL, Fortune 500) and Nokia (NOK) agreed to settle their long-running patent dispute Tuesday. Apple will pay Nokia a one-time sum, and ongoing royalties will go to Nokia. Shares of Nokia jumped 2.5%, while shares of Apple edged up 1.8%.

Meanwhile, Honda (HMC) released its full-year forecast Tuesday, announcing that it expects a 63.5% drop in 2011 profit. Shares of Honda slid 0.4%.

Shares of Hewlett-Packard (HPQ, Fortune 500) rose 0.2%, after the company announced a major executive shake-up late Monday.

Avis Budget Group's (CAR, Fortune 500) stock rose 7.6% after the car rental said it was acquiring Avis Europe for $1 billion. Avis has been awaiting regulatory approval for its $1.7 billion bid to buy Dollar Thrifty (DTG), whose shares tumbled 9%. Shares of Hertz (HTZ, Fortune 500), which is also courting Dollar, rose 9%.

Currencies and commodities: The dollar fell against the euro, but gained versus the British and the Japanese yen.

Oil for July delivery gained $2.07 to settle at $99.37 a barrel.

Gold futures for August delivery rose $8.80 to settle $1,1524.40 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury slipped, pushing the yield up to 3.10% from 2.99% late Monday.

World markets: European stocks ended higher. Britain's FTSE 100 rose 0.5%, the DAX in Germany jumped 1.7% and France's CAC 40 added 1.5%.

Asian markets ended mostly higher. The Shanghai Composite climbed 1.1% and Japan's Nikkei rose 1.1%, while the Hang Seng in Hong Kong ended barely below breakeven.

U.S. jobs creation lags far behind ... Europe

China released inflation data that showed the nation's rapid pace of inflation picked up again in May -- even though the government has stepped up efforts to tame rising prices.

The country's inflation rate rose slightly to 5.5% in May, up from an increase of 5.3% in April, according to China's National Bureau of Statistics.

After the announcement, China's central bank raised the reserve requirement ratio for depository financial institutions by half a percentage point, effective June 20.

While inflation in China remains high, the report eased fears of stalling growth.

"It's either inflation or a slowdown -- there's always something to worry about," said Anthony Conroy, head trader at BNY ConvergEx Group. "But I think you would rather worry about inflation than things really falling off a cliff."