Investors moved into stocks after getting encouraging readings on two of the best gauges of the economy's health: consumer spending and corporate profits.The Dow Jones industrial average rose 61 points Thursday after slipping the day before. The gains resume the market's climb from Monday and Tuesday, when the Dow logged an advance of 244 points, its best back-to-back advance since July.
Investors were encouraged to see that consumer spending could finally be starting to recover as retailers reported their first sales gains last month in more than a year. A closely watched gauge of sales at major retailers showed an increase of 0.1 percent for September, compared with a 1.0 percent drop a year ago.
While still tepid, it was the first monthly gain in the International Council of Shopping Centers-Goldman Sachs tally since July 2008. The upbeat mood on Wall Street began when Alcoa Inc. surprised investors with its first profit in nine months, which the aluminum company attributed to cost-cutting and rising sales to automakers.
One of the first major companies to report earnings, Alcoa's better-than-expected report and upbeat demand prediction reassured investors of a positive earnings season.
"Alcoa set the tone and backed it up," Michael Feser, president of Zecco Trading said. A better reading on the labor market also raised investors' optimism. The Labor Department reported that new claims for jobless benefits fell to 521,000 last week, down from 554,000 the previous week and better than analysts had expected.
It was the lowest level since early January. Continuing claims fell to 6.04 million, better than the slight increase analysts had expected.
According to preliminary calculations, the Dow rose 61.29, or 0.6 percent, to 9,786.87. The market ended off its best levels after demand at a government auction of 30-year bonds fell short of expectations. The Dow was up 111 points at its high.
The Standard & Poor's 500 index rose 7.90, or 0.8 percent, to 1,065.48, while the Nasdaq composite index rose 13.60, or 0.6 percent, to 2,123.93.
About three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.3 billion shares, compared 1.1 billion Wednesday.
Bond prices fell after lackluster demand at an auction of 30-year bonds. The yield on the benchmark 10-year Treasury note rose to 3.25 percent from 3.19 percent late Wednesday.
The week's advance has put the market's seven-month rally back on track, sending the major indexes toward their best weekly gain since early July after back-to-back weeks of losses. Investors had become discouraged in recent weeks by a stream of disappointing economic data, as improvements in areas like manufacturing slowed.
But this week, the market got a boost of confidence from signs of growth in service industries and an upbeat analyst report on banks. A surprise interest rate hike in Australia, meanwhile, was seen as a vote of confidence in the global economy.
"The way we will perform is two steps forward, one step back," said Michael Strauss, chief economist at Commonfund in Wilton, Conn. "But at the end of the day we are moving to higher prices."
Still, much depends on how the rest of earnings season goes. Investors question whether the market's more than 50 percent move off of 12-year lows in March can continue at such a rapid pace if earnings results don't back up the market's perception that the economy is on track for growth.
"The Alcoa number that came out after-hours was surprisingly good, but we have a lot of major companies, including the financials, that will be coming out in the next couple of weeks," said Robert MacIntosh, chief economist at Eaton Vance Management. "I wouldn't say we're in the clear."
Companies mostly beat modest earnings expectations during the second quarter because of cost-cutting measures, and investors now want to see actual revenue growth as a driver of profits.
The reports from retailers on Thursday offered fresh hope that sales will be better this quarter. Limited Brands Inc., which runs Victoria's Secret and Bath & Body Works, and accessories chain The Buckle Inc. both posted sales increases for September.
J.C. Penney Co. and Target Corp. raised their profit outlooks after reporting smaller-than-expected declines.
Limited Brands rose 70 cents, or 3.9 percent, to $18.53, while J.C. Penney added 25 cents, or 0.7 percent, to $35.16. Target rose 83 cents, or 1.7 percent, to $49.34. Alcoa rose 1 percent, gaining 15 cents to $14.35.
Commodities prices rallied as the dollar fell further against other currencies. Gold hit another new record, rising as high as $1,059.60 an ounce. Oil prices rallied $2.12 to settle at $71.69 a barrel on the New York Mercantile Exchange.
In other trading, the Russell 2000 index of smaller companies rose 8.87, or 1.5 percent, to 610.95. Overseas, Britain's FTSE 100 gained 0.9 percent, while Germany's DAX index and France's CAC-40 each jumped 1.3 percent. Japan's Nikkei stock average rose 0.3 percent.
