Investors kept the stock market's upward momentum going Monday, sending shares sharply higher after retail sales rebounded more than expected in October and the dollar extended its slide.
Major stock indexes rose more than 1 percent to new 13-month highs, including the Dow Jones industrial average, which jumped 136 points. The Standard & Poor's 500 index closed above the 1,100 mark for the first time in more than a year.
The weaker dollar lifted gold to a new record and pumped up prices of other commodities, including oil. That, in turn, helped shares of energy and materials companies.
Stocks got another boost after Federal Reserve Chairman Ben Bernanke reaffirmed in a midday speech that the central bank would hold interest rates at record-low levels for an "extended period," and that he didn't see signs that the money being pumped into the economy by the government was creating speculative bubbles. Bond prices rose after Bernanke said inflation appeared contained.
Some analysts have cautioned that the surge in stocks, which has been hastened by the falling dollar, might not be justified by the still-struggling economy. In fact, they say some investors might misread the big advance in stocks as a sign that the economy is stronger than it actually is.
The market's own dynamics fed some of the day's gains.
Dan Deming, a trader with Stutland Equities, said the S&P 500's move above 1,100 after a month of retreating when it hit that level gave some investors a shot of confidence and led to short-covering, which tends to amplify gains in the market. Short-covering occurs when investors have to buy stock after having earlier sold borrowed shares in a bet they would fall.
"We're breaking through the 1,100 mark, which is psychologically significant, and the market is seeing a little pop from that," Deming said.
Stocks began rising from the start after the Commerce Department said retail sales rose 1.4 percent in October, nearly double the increase forecast by economists polled by Thomson Reuters. It was a sharp rebound following the 2.3 percent drop in September. Excluding the gain from autos, however, sales rose just 0.2 percent, half of what economists predicted.
Jamie Cox, a managing partner at Harris Financial Group, said the sales growth was a good sign heading into the holiday shopping season, especially because the numbers weren't inflated by factors such as sales-tax holidays and government stimulus programs that had been present in the preceding months.
The Dow advanced 136.49, or 1.3 percent, to 10,406.96 after rising nearly 164 points.
The broader S&P 500 index rose 15.82, or 1.5 percent, to 1,109.30. It has hovered around the 1,100 mark for a month but hadn't closed above it since October last year. The index first finished above 1,100 more than a decade ago, in March 1998.
The Nasdaq composite index rose 29.97, or 1.4 percent, to 2,197.85.
The Russell 2000 index of smaller companies advanced 16.59, or 2.8 percent, to 602.87.
The ICE Futures US dollar index, which measures the dollar against other currencies, fell 0.6 percent to a 15-month low. Gold rose $22.50, or 2 percent, at $1,139.20 an ounce on the New York Mercantile Exchange, and topped $1,140 in after-hours trading.
Investors have been using the weak dollar to finance purchases of higher-yielding assets. The move, what's known as a "carry trade," can further weaken the dollar.
Bond prices rose, pushing down yields. The yield on the benchmark 10-year Treasury note fell to 3.34 percent from 3.42 percent late Friday.
The stock market has been on a strong run after a pullback at the end of October. The Dow has jumped 694 points, or 7.2 percent, since the start of the month, raising questions about whether the market's advance is justified given that the economy is still struggling.
Joe Battipaglia, market strategist for the private client group at Stifel Nicolaus & Co., said investors are placing big bets that interest rates will remain at record low rates because of Bernanke's comments and because the economy remains fragile. He contends the gains in stocks are being driven by trades like those involving the dollar and not by healthy economic fundamentals.
"It's not like we're on some rocket trajectory of economic growth that's going to bring up the earnings and bring down unemployment," Battipaglia said.
Other analysts are less skeptical of the market's rise. J. Stephen Lauck, chief executive and portfolio manager at Ashfield Capital Partners, said he isn't worried that the market is getting overheated because of improvements he sees in corporate profits.
"Forecasts are still understating what the earnings are going to be," he said.
Crude oil rose $2.55 to settle at $78.90 per barrel on the New York Mercantile Exchange.
Energy and materials stocks rose. Baker Hughes Inc. rose $1.89, or 4.6 percent, to $43.34, while Freeport-McMoRan Copper & Gold Inc. rose $2.91, or 3.6 percent, to $84.48.
General Motors Co. said it lost $1.2 billion in the period since emerging from bankruptcy and the end of the third quarter on Sept. 30. GM said it will begin to repay $6.7 billion in government loans, though the money will come from funds loaned by the government.
About five stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 4.6 billion shares compared with 3.9 billion Friday.
Overseas, Japan's Nikkei stock average rose 0.2 percent after that country's economy grew for the second straight quarter, marking an end to the recession there.
Investors also drew confidence from the results of the 21-member Asia-Pacific Economic Cooperation forum, which said it would maintain stimulus spending until a global economic recovery is at hand.
Britain's FTSE 100 rose 1.6 percent, Germany's DAX index gained 2.1 percent, and France's CAC-40 rose 1.5 percent.