Investors held on to their optimism Monday, sending stocks sharply higher in response to stronger retail earnings and a smaller-than-expected drop in a key economic gauge.
The Dow Jones industrials surged more than 210 points, to close just below 9,000.
Analysts said the absence of any significant negative news, such as accounting restatements, added to the good mood on Wall Street, which has seen two straight weeks of gains among the three major indexes. Light trading also gave prices a boost.
"The path of least resistance is always higher," said Richard E. Cripps, chief market strategist for Legg Mason Inc. in Baltimore.
The Dow closed up 212.73, or 2.4 percent, at 8,990.79, following a 0.4 percent advance last week. The Dow now has recovered about 1,500 points since it hit an intraday low of 7,489.53 on July 24.
The last time the Dow closed above 9,000 was nearly six weeks ago, on July 9.
The broader market also closed higher Monday.
The Nasdaq composite index was up 33.53, or 2.5 percent, at 1,394.54, having surged 4.2 percent last week. This was the Nasdaq's best finish in a month, having closed on July 17 at 1,397.25.
The Standard & Poor's 500 index rose 21.93, or 2.4 percent, at 950.70, following a weekly gain of 2.2 percent.
The Conference Board reported that its Index of Leading Economic Indicators, an important gauge of U.S. economic activity, fell 0.4 percent, to 111.7 in July, slightly beating analysts' expectation of a decline of 0.5 percent.
July's figure represents the second straight monthly decline in the index, following a revised 0.2 percent drop in June.
The better-than-expected report prompted investors to continue their buying from last week. The three major indexes rose for the second straight week last week, a feat not seen in five months, buoyed by greater Wall Street confidence after hundreds of companies vouched for their financial statements by the Aug. 14 deadline set by the Securities and Exchange Commission.
Still, analysts said investors' optimism remains fragile, particularly after the Federal Reserve last week left interest rates unchanged but raised the possibility of future cuts, citing risks of a softening economy.
"People are feeling better about the market in general," said Brian G. Belski, fundamental market strategist at US Bancorp Piper Jaffray Inc. in New York. "Whether that has staying power remains in question given that one, the markets have been up four weeks in a row and two, it's heavy vacation time on Wall Street."
Strong earnings lifted several issues, including home-improvement retailer Lowe's Cos., which rose $4.21, to $41, after reporting a 42 percent increase in second-quarter earnings and raising forecasts for the third quarter that beat analysts' current consensus.
Toy retailer Toys "R" Us Inc. gained $1.08, to $13.90, after narrowing its loss to $17 million in the second quarter.
Vivendi Universal rose $2.17, to $11.93, boosted by chairman Jean-Rene Fourtou's letter to shareholders announcing $1.97 billion in financing from creditor banks and expressing confidence that the company would overcome its financial crisis.
Pulling down pharmaceutical shares was AstraZeneca Inc.'s news that a key trial of its cancer drug Iressa had disappointing results. The Anglo-Swedish drug company's shares fell $6.02, to $30.98.
Also hurt were two companies with similar drugs in their pipelines, OSI Pharmaceuticals Inc., which dropped $18.74, to $14.05, and ImClone Systems Inc., which fell 98 cents, to $8.26.
Advancing issues led decliners more than 2-to-1 on the New York Stock Exchange. Volume was light, at 1.27 billion shares, the same as Friday.
The Russell 2000 index, the barometer of smaller-company stocks, rose 5.32, or 1.3 percent, to 401.29.
Overseas, Japan's Nikkei stock average finished down 1.93 percent.
In Europe, France's CAC-40 rose 3.52 percent, Britain's FTSE 100 gained 2.24 percent, and Germany's DAX index rose 4.15 percent.
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