NEW YORK - Blue chip stocks surged to a strong finish Tuesday as upbeat economic news countered some cautious corporate forecasts.
Tech stocks struggled to advance as investors sought profits, but the Dow Jones industrial average gained more than 100 points.
Wall Street welcomed economic reports that suggested inflation is under control and better times are ahead for the nation's battered manufacturing sector. Analysts said investors were rotating away from riskier tech stocks and into large-cap value companies as they seek to lock in gains before the end of the year.
"The long-term economic numbers are strengthening, which I think is good, so now let's see if the corporate numbers remain favorable," said Stephen Carl, head of equity trading at The Williams Capital Group. "If we can get the moon and all the stars lined up right, we could see a very good start to the next year."
Recent events - such as the Dow jumping past the 10,000 level and the weekend capture of fallen Iraqi leader Saddam Hussein - have also given a boost to investor confidence.
According to preliminary calculations, the Dow closed up 106.74, or 1.1 percent, at 10,129.56, its highest level in nearly 19 months. It last closed higher on May 23, 2002, when it ended the day at 10,216.08.
The Standard & Poor's 500 index also reached a 19-month high, closing up 7.09, or 0.7 percent, at 1,075.13, its highest level since May 24, 2002, when it closed at 1,083.82.
The tech-heavy Nasdaq composite index also made gains, after earlier declines, closing up 6.03, or 0.3 percent, at 1,924.29.
A series of positive economic reports contributed to the rally. The Federal Reserve reported a 0.9 percent rise in industrial production for November, well beyond analyst expectations. It was the strongest reading since October 1999, and signaled that the worst may be over for the long-suffering manufacturing sector.
"Industrial production was the single biggest surprise," said Mark Vitner, an economist with Wachovia Corp. in Charlotte, N.C. "It suggests not only is the rate of the increase in production accelerating, but a broader assortment of industries are seeing an improvement, and that tells me the recovery is much more durable than some might have thought."
Separately, the Labor Department reported a 0.2 percent dip in its Consumer Price Index, the government's most closely watched inflation barometer. Economists were forecasting a tiny 0.1 percent advance.
The November CPI reading, pulled down by cheaper gasoline, clothing and airfare costs, offered fresh evidence that inflation won't be much of a problem as the economy continues to improve. Economists said it bolsters the case for the Fed to leave interest rates low for some time.
Advancers on Tuesday included Oracle Corp., which closed up 42 cents at $13.12 after its quarterly earnings beat analyst expectations by a penny a share. The high-tech bellwether's report bodes well for others in the sector, as it suggests companies are slowly starting to increase their spending on business software.
Motorola Inc., closed up 54 cents at $13.33 after its board announced it had elected former Sun Microsystems Inc. executive Edward J. Zander as its new chief executive. Zander succeeds Christopher B. Galvin, who is retiring after a series of clashes with the board.
Wal-Mart Stores Inc. gained 65 cents to close at $51.39 after a rough session Monday, when it saw sharp declines after reporting December same-store sales growth was tracking at the low end of its forecast.
Other retailers were under pressure, however, including Sears, Roebuck and Co. which closed down 91 cents at $43.59 after it reported sales that were below forecasts. UBS downgraded Sears, questioning its discounting strategy, but the company hinted more bargains were ahead.
Several floor trading companies declined on news that the California Public Employees' Retirement System had filed suit against the New York Stock Exchange, alleging seven "specialist" firms have engaged in fraudulent practices. LaBranche & Co. was down 71 cents at $9.32, and Van der Moolen Specialists declined 58 cents to $8.12.
Aerospace and defense contractor Honeywell International Inc. also among decliners, losing 34 cents to close at $30.49 after saying pension costs would continue to pull down earnings through 2005, despite improving sales at its four business units.
Advancing issues outnumbered decliners about 3 to 2 on the NYSE. Volume was at 1.51 billion shares, compared with 1.47 billion shares traded at the same point Monday.
The Russell 2000 index, which tracks smaller company stocks, closed up 2.49, or 0.5 percent, at 537.74.
Overseas, Japan's Nikkei stock average finished 2.1 percent lower Tuesday, after seeing a sharp rise in the previous session on news of Saddam's capture. In Europe, France's CAC-40 closed down 0.1 percent, Britain's FTSE 100 ended the day 0.3 percent lower, and Germany's DAX index lost 0.2 percent.