Key U.S. stock indexes surged to 18-month highs Monday, boosted by a pair of surprisingly brisk economic reports and a promising start to the holiday shopping season.
U.S. factory activity stormed ahead in November at its fastest pace in 20 years, and construction spending reached a new peak in October, data showed.
Retail king Wal-Mart Stores and credit card giant Visa USA reported a rise in post-Thanksgiving spending over 2002.
The Standard & Poor's 500 index, a benchmark for the U.S. stock market, gained 11.92 points, or 1.1%, to 1,070.12 -- its highest close since May 2002.
The Dow, after losing steam at mid-session, surged in the last 90 minutes of trading to finish up 116.59 points, or 1.2%, at 9,899.05, its highest close since May 2002.
Nasdaq climbed 29.56 points, or 1.5%, to 1,989.82, its highest close since June 2002.
Winners beat losers by 5 to 2 on the New York Stock Exchange and by 5 to 3 on Nasdaq. Volume was active.
"People feel the wealth effect from the stock market," said Michael Cohen, director of research at Pacific American Securities in San Diego.
"They're feeling a lot better this Christmas than they have for the last two."
But not in every respect.
Inflation jitters and a weak dollar helped propel gold futures above $400 an ounce for the first time since March 1996. The precious metal soared $5.90 to $402.70, setting a seven-year high.
Moreover, in spite of early indications, the holiday shopping season has a long way to go, cautioned Chris Orndorff, head of equities at Payden & Rygel, a Los Angeles-based money management firm.
"Investors are optimistic. Personally, I'm a little more wait and see," he said, adding that guarded consumers may drive hard bargains by holding out until the last minute.
Although initial sales indications from discount chains have been good, other retailers have been "hit and miss," Orndorff said.
Still, the strong start to December stock trading spurred hopes for a traditional "Santa Claus rally," analysts said.
Historically, December has been one of the best months for the blue-chip indexes, according to the Stock Trader's Almanac.
On the economic front, the Institute for Supply Management said its manufacturing index reached 62.8 last month, the highest reading since December 1983 and handily ahead of economists' expectations.
Construction spending in October posted its fourth straight record high, the Commerce Department said.
But with the Dow up 18.7% this year, the S&P 500 up 21.6% and Nasdaq up 49%, stock prices may have "gotten ahead of themselves," Orndorff said. "The stock market is more about momentum than fundamentals right now," he said.
Gold's close above $400 an ounce -- anticipated for weeks -- came after the dollar swooned in early trading Monday. Gold sales are denominated in dollars, and a weaker greenback means gold is cheaper for foreign buyers.
The dollar recovered in late trading, but closed lower against the Japanese yen. It managed to eke out a small gain against the euro, which closed at a record high against the dollar Friday.
Treasury yields climbed as investors shifted assets out of fixed income, and also on fears that a strengthening economy will lead to higher interest rates.
The yield on the benchmark 10-year T-note closed at 4.39%, up from 4.33% on Friday.
In other highlights:
* The stocks formerly known as "old economy," whose fortunes are seen as closely tied to overall U.S. growth, helped lift the Dow. International Paper was among 26 of the index's 30 members to finish in the green, rising $1.54 to $38.75 on an upgrade from Deutsche Bank.
Alcoa gained $1.12 to $33.93, 3M added $2.58 to $81.62 and DuPont rose $1.24 to $42.70.
* Retailers were mixed, as Wal-Mart sagged $1.14 to $54.50 and Best Buy slipped $1.13 to $60.87, but Target gained 86 cents to $39.58 and J.C. Penney rose 89 cents to $25.77. High expectations and high valuations may be weighing on the sector's leaders, analysts said.
* Bloomberg's U.S. home builders index climbed 2.5%, powered by Lennar's gain of $3.60 to $101.50 and DR Horton's rise of $1.36 to $45.06. The index has zoomed 98% year-to-date.
* In the tech sector, software maker Oracle climbed 49 cents to $12.51 on a recommendation from JMP Securities and Yahoo rose $1.22 to $44.21 as Web stocks remained robust.
* Internet phone-service stocks slumped as investors took profits in the volatile niche group. 8x8 slid $1.55 to $5.97 and VocalTec Communications lost $1.08 to $4.99.
* European bourses rallied, including key indexes in Germany, up 2%; France, up 1.9%; and Britain, up 1.6%. Markets also were higher in Asia and Latin America.
Market Roundup, C9-10.