Stocks soared to multiyear highs as investors welcomed a trifecta of positive signals on the economy from U.S. consumers, the banking system and the Federal Reserve.
The Nasdaq Composite finished above the 3000 level for the first time since December 2000, adding 56 points, to close at 3039.88. The Dow gained 218 points to end at its highest level since May 2008. Jonathan Cheng has details on The News Hub.
The Nasdaq Composite Index surged 1.9% to its first close above 3000 since late 2000. The Dow Jones Industrial Average jumped 217.97 points, or 1.7%, to 13177.68, its highest level since December 2007, and the Standard & Poor's 500-stock index barreled toward 1400, a level it hasn't seen since June 2008.
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A trader works on the floor of the New York Stock Exchange on Tuesday.
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For all three indexes, Tuesday's jump was the biggest in point and percentage terms this year.
Investors started the day on a positive note after the Commerce Department said retail sales gained 1.1% in February from the month before. The gains held after the Fed took a brighter view on the economy, but made clear that officials plan to maintain a loose monetary policy despite those improvements.
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The most powerful move came in the final hour of trading, after blue-chip financial company J.P. Morgan Chase said the Fed had signed off on the bank's plan to raise its dividend and launch a new round of share buybacks. That was followed by announcements from several banks that they had passed the Fed's "stress tests."
"Strong retail sales, an upbeat Fed and positive news from banks all worked to pull money off the sidelines today," said Michael Cippoletti, head of U.S. equity capital markets for BMO Capital Markets. He said investors were willing to overlook any concerns that the Fed may be less likely to step up its bond-buying plans, which some investors had expected after a Wall Street Journal article last week raised the prospect of further bond purchases by the Fed. Investors have driven stock prices higher in recent years as the Fed launched bond purchases to lower interest rates and support the U.S. economy.
"People were more interested in seeing a positive tone from the Fed than in more easing," Mr. Cippoletti said.
Concerns over the health of U.S. banks have cast a shadow over the recent recovery, and the stress-test results, showing most U.S. banks would be well-capitalized in the event of an economic downturn, helped allay some of those worries.
J.P. Morgan soared 7% and Bank of America gained 6.3% to lead Dow components, which saw all 30 of its members finish in positive territory. In a reflection of the breadth of the rally, just 5% of the S&P 500 stocks finished the day lower.
Still, details continued to emerge after the close, including news that Citigroup, SunTrust Banks and MetLife didn't meet the minimum capital threshold required by the Fed. Citigroup, which rose 6.3% during regular trading hours, fell 3.5% in after-hours trading; MetLife, which was 4.7% higher at the closing bell, dropped 3.7% after hours.
In the bond market, investors dumped long-term Treasury debt, driving yields higher. The Fed has been a big buyer of long-term U.S. bonds, snapping up roughly $238 billion since October. Without any signs that the Fed was about to embark on another round of bond buying, bond prices sank. The yield on the 10-year note rose to 2.102%, its highest yield in more than three months, from 2.030% Monday.
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The run-up added another spark of excitement to a year that has gone better than many investors could have foreseen. The Dow has suffered only one day of triple-digit point declines this year, amid a lull in Europe's sovereign-debt crisis and a run of strong U.S. economic data.
Tuesday's gain was the fifth consecutive for the Dow, the longest such streak since mid-September. Surging technology stocks, which were among the strongest performers of the day, helped propel the Nasdaq up 56.22 points, or 1.9%, at 3039.88, its highest close since November 2000.
The index, which had peaked at 5048.62 in March of that year, continued its swoon through Oct. 9, 2002, when it bottomed at 1114.11. This year, the Nasdaq has climbed 17%, leading the major U.S. indexes.
Technology stocks recently have been attracting investors of all types, including those that favor growth stocks, seen as more risky but likely to rise faster than average, and those that prefer "value" stocks, companies that are slower growing but are profitable and offer compensation such as dividends.
"In 2000, it was approaching a mania, a must-own-at-all-costs mentality," said Jim Russell, who helps manage $103 billion as chief equity strategist for U.S. Bank Wealth Management. This time, he said, "the earnings have come through and it's justified the run-up in these stocks."
In other corporate news, Urban Outfitters reported fiscal fourth-quarter earnings that fell shy of estimates as gross margins narrowed due to increased markdowns. The apparel retailer slumped 1.56, or 5.3%, to 27.95, the biggest percentage decliner on the S&P 500.
GNC Holdings said it likely will beat its first-quarter earnings projection after it recorded stronger-than-expected sales at existing stores through February. The nutritional-supplement retailer rose 2.71, or 8.7%, to 33.95.
Barnes & Noble named Michael P. Huseby, a Cablevision Systems veteran, as its chief financial officer. The appointment is expected to help the bookseller as it undergoes a tech-focused transformation. Barnes & Noble rose 77 cents, or 5.7%, to 124.54.
—Matt Phillips contributed to this article.
Write to Jonathan Cheng at jonathan.cheng@wsj.com
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