Wall Street surged higher Tuesday, carrying the Dow Jones industrials to their second-best close ever as positive economic data further buoyed a growing sense of optimism among investors. The index finished just 53 points away from its record close.
Stocks, particularly blue chips, rose after the Conference Board said its September consumer confidence gauge rose more than expected, reaching 104.5 from a revised reading of 100.2 in August. Analysts forecast the index would rise to 103.
Also bolstering investor enthusiasm was a report from the Federal Reserve Bank of Richmond, Va., that showed the region's economy strengthened this month. The bank's manufacturing index came in at 9, up from 3 in August.
Jack Ablin, chief investment officer with Harris Private Bank, said the market's advance reflected a buoyant outlook and the view that the Federal Reserve might have room to ease short-term interest rates. He pointed to low inflation and the recent pullback in oil prices, which have fallen nearly 20% from their highs.
"The Fed has a lot more elbow room to lower rates," he said. "The Fed could maybe even lower this year."
The Dow gained 93.58 points, or 0.8%, to 11,669.39. The Dow's advance put it within range of its high of 11,722.98 set in January 2000.
Broader stock indicators also jumped sharply. The Standard & Poor's 500 index rose to a 5 1/2 -year high, gaining 9.97 points, or 0.8% to 1,336.34 and the Nasdaq composite index rose 12.27 points, or 0.6% to 2,261.34.
Bond yields rose following a modest sell-off that may have been triggered by profit taking. Bond yields rise as their prices fall. The yield on the 10-year T-note, a benchmark for mortgages, climbed to 4.58%, from 4.54% on Monday.
Crude oil futures declined 44 cents, to $61.01 in New York trading. The slide in oil prices this month has given investors optimism that consumer spending will hold up even as the economy slows and therefore help protect corporate profits.
Investor sentiment has strengthened since the Fed's August decision to leave interest rates unchanged after a two-year string of 17 straight increases. That enthusiasm became more widespread after the central bank held off again last week, signaling to investors that inflation remained within reasonable limits.
Recent reports on the health of the economy appeared to ease concerns that the Fed had overreached in its bid to corral inflation. Despite a disappointing report from the Philadelphia Fed last week about regional manufacturing activity, investors have grown increasingly confident as more economic data have trickled out and oil prices have held at lower levels long enough to make a difference at the pump.
Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc., doesn't expect the stock market's gains to last, however.
"I don't think we're going to go up, up and away from here. I think you've got momentum and the magnetism of a new record high for the Dow. I would preach a little caution here."
Goldman contends the markets will discount for November's midterm elections by mid-to-late October and that some of the run-up this week could reflect institutional investors' desire to burnish their third-quarter figures.
"This time of the year you also get some window dressing by institutions and also some short covering," he said. "The bears have not had a lot of a fun."
In other market highlights:
* Los Angeles-based Reliance Steel & Aluminum shares surged $3.84 to $33.06, its biggest gain in six years. The metals distributor boosted its third-quarter profit forecast because of rising demand and the acquisition of Yarde Metals.
Reliance said profit would be $1.35 to $1.40 a share, up from its July forecast of $1.15 to $1.20.
Allegheny Technologies, a stainless steel producer, advanced $4.26 to $63.28. U.S. Steel, the No. 1 U.S.-based steelmaker, rose $2.58 to $57.57. Nucor, the second-largest, added $2.30 to $49.47.
* General Motors helped pace the Dow's advance. GM jumped 81 cents to $31.41 after Chief Financial Officer Fritz Henderson said the company was focused on increasing profit in Europe and would carefully study a proposed alliance with Renault and Nissan.
* EBay climbed $1.45 to $27.67 after an analyst raised his third-quarter revenue estimate for the company amid renewed merger speculation about the e-commerce leader.
Talk of a marriage between Microsoft and EBay has popped up regularly for months. Representatives from both companies Tuesday said they did not comment on rumors. Microsoft added 25 cents to $27.20.
* Intel rallied after saying it will start selling a new computer processor in November that can handle more tasks, in a bid to stem market share gains by rival Advanced Micro Devices.
Intel rose 55 cents to $19.96. Advanced Micro slid 78 cents to $25.99.
PMC-Sierra, a maker of communications and data storage chips, fell 55 cents to $6 after cutting its third-quarter sales forecast. Chip component maker Innovex fell 38 cents to $2.40 after warning that fourth-quarter sales could fall short of expectations.