Starved for months for upbeat news, Wall Street suddenly is getting some -- and investors are showing they haven't forgotten how to respond.
Stock prices surged Thursday, extending the rally that began on Tuesday as buyers snapped up shares still trading near their lowest levels in as much as a decade.
The Dow Jones industrial average jumped 239.66 points, or 3.5%, to 7,170.06, bringing the blue-chip index's three-day gain to 662 points, or 9.5%. Broader indexes also rose sharply.
Although many analysts remain fearful that the rebound in share prices could quickly give way to another sell-off in the now 16-month-old bear market, they say it's a hopeful sign that investors aren't ignoring positive reports on the economy and individual companies.
"We had some good news and the market ate it up," said Steve Todd, editor of the Todd Market Forecast in Crestline, Calif.
The government reported that retail sales rose 0.7% in February, excluding depressed car sales. January sales using that same measure were revised to a 1.6% increase, from the 0.9% gain first reported.
The back-to-back gains suggested that consumer spending has stabilized after diving in the second half of 2008. That's crucial for the economy because consumer outlays account for more than two-thirds of economic activity.
The February sales report "increases the probability that this recession is starting to wind down," said Bernard Baumohl, economist at the Economic Outlook Group in Princeton Junction, N.J.
Wall Street's turnaround began on Tuesday, when the Dow rocketed 379 points, or 5.8%, one day after falling to a fresh 12-year low.
The question is whether this will be just another brief rally in an ongoing slide. After the autumn market meltdown, the Dow rose nearly 20% from Nov. 21 to Jan. 2 as some investors stepped in, betting that the credit crisis was receding and that the recession would end early this year.
Instead, the market caved again in January and February amid a barrage of more bad news on the economy, and as investors grew impatient with the Obama administration's delays in devising a plan to get rotting loans off banks' books. Treasury Secretary Timothy F. Geithner promised on Tuesday that details about the plan would be announced in the next two weeks.
Jeff Saut, chief investment strategist at brokerage Raymond James & Associates in St. Petersburg, Fla., noted that the market's recovery this week was "sharp and fast -- characteristic of bear-market rallies."
