Stocks rise on retail sales, manufacturing data

Better news on retail sales and manufacturing helped send stocks higher Tuesday, as did comments from Federal Reserve Chairman Ben Bernanke that the recession was probably over.

Surging materials and industrial companies like Alcoa and Caterpillar pulled the Dow Jones industrial average to a gain of 57 points, its seventh climb in eight days and another high for the year. Manufacturers are expected to be among the early beneficiaries if the economy strengthens and demand picks up.

Hopes for a rebound grew after the government reported that retail sales jumped in August by the biggest amount in three years. The Fed's index of manufacturing in the New York region rose to its best level since late 2007.

That upbeat economic news helped allay concerns about a separate government report finding that inflation at the wholesale level rose last month at double the rate analysts expected.

Meanwhile, Bernanke cheered investors by saying that the worst recession since the 1930s has "very likely" ended, though he cautioned that problems like high unemployment will remain.

Investors have been betting on a recovery. The Standard & Poor's 500 index, the benchmark for many mutual funds, has surged 55.6 percent since skidding to a 12-year low in March.

Stocks zigzagged in morning trading before gaining steam in the afternoon, similar to the way trading played out Monday. Analysts say the slow-building advances are a sign that investors are pouncing on dips to get into the rally.

The short bouts of selling have meant the market has risen without the sizable break, which many analysts still say is overdue. Even when the news isn't good, market sentiment seems immune to developments that would have punctured the rally only months ago.

Investors shrugged off news that wholesale prices rose 1.7 percent last month, and disappointing earnings from two major retailers, Best Buy Co. and Kroger Co., also failed to push the stock market off course.

"You want to say that the market is a little bit tired after the run we've had yet we continue to grind higher," said Ryan Larson, senior equity trader at Voyageur Asset Management.

The Dow rose 56.61, or 0.6 percent, to 9,683.41, its highest close since Oct. 6, when it finished at 9,956.

The S&P 500 index rose 3.29, or 0.3 percent, to 1,052.63, while the Nasdaq composite index rose 10.86, or 0.5 percent, to 2,102.64. All three indicators are at their highest levels for 2009.

More than two stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 6.3 billion shares compared with 4.9 billion Monday.

The government's report that retail sales jumped 2.7 percent in August boosted confidence in the economy. Analysts say improvements in consumer spending are crucial to a recovery.

Even after stripping out the sizable gains from the government's popular Cash for Clunkers program, sales rose 1.1 percent, well beyond the rise of 0.4 percent expected by analysts.

Commodity and industrial stocks rose as a weaker dollar pushed up materials prices. Alcoa Inc. added $1.05, or 8.1 percent, to $13.99. Caterpillar Inc. rose $2.93, or 6 percent, to $51.70.

Gregg S. Fisher, chief investment officer at financial advisory firm Gerstein Fisher in New York, said that despite the recent gains investors could still run into trouble.

"Investors are always following the herd. I think investors should sort of catch themselves now and not get overconfident," he said.

The market's latest gains came one year after the Dow tumbled 500 points following the collapse of Lehman Brothers Holdings Inc., which deepened the recession.

In other trading, bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.46 percent from 3.43 percent late Monday.

Crude oil rose $2.07 to settle at $70.93 a barrel on the New York Mercantile Exchange. Gold also rose after the report on inflation. The metal is often used as a hedge against rising prices.

The Russell 2000 index of smaller companies rose 4.81, or 0.8 percent, to 604.84.

Overseas, Britain's FTSE 100 rose 0.5 percent, Germany's DAX index rose 0.2 percent, and France's CAC-40 added 0.6 percent. Japan's Nikkei stock average rose 0.2 percent.