New York-- The stock market posted its best day this year, with Tuesday's late surge coming from JPMorgan Chase after the bank announced it will raise its dividend.
Bank stocks turbocharged what was already a big market rally Tuesday, and all three major stock indexes posted their biggest gains of the year. The Dow Jones industrial average rose 218 points and closed at its highest level since the end of 2007.
The Nasdaq composite closed above 3,000 for the first time since December 2000. Stocks climbed from the opening bell after the government said February retail sales gains were the strongest since September.
Then, late in the trading session, JPMorgan Chase, (JPM) the country's largest bank by assets, announced that it plans to buy back as much as $15 billion of its stock and raise its quarterly dividend to 30 cents per share from 25 cents a share.
Major indexes added to their gains after the Federal Reserve said it saw signs of an improving economy. The Fed noted that the unemployment rate has declined and should keep falling. It also said strains in the global financial markets have eased.
The Dow Jones industrial average finished at 13,177, its highest close since Dec. 31, 2007. The close put the Dow within 1,000 points of its all-time record, 14,164, set less than three months earlier, Oct. 9, 2007.
The Nasdaq composite index rose 56.22 points Tuesday, or 1.9%, to 3,039.88, its first close above 3,000 since months after the bubble in dot-com stocks burst.
Jack Ablin, chief investment officer at Harris Private Bank, said the key difference between the Nasdaq then and now is that the technology companies that dominate the index only promised profits 12 years ago.
Today, the Nasdaq's largest companies are Apple, Microsoft and Google, corporate titans with massive earnings.
"The Nasdaq hasn't done much of anything for 12 years, but it's had a huge rally in earnings," Ablin said.
Stocks were already showing nice gains after strong February retail sales results early Tuesday.
The Commerce Department said retail sales rose 1.1% last month, biggest gain since September. Some of the gain reflected higher gas prices, but consumers also bought more cars, clothes and appliances. Department stores had their biggest gains in more than a year.
The government also revised its estimates higher for December and January.
A reading of confidence among small business owners also rose in February for the sixth month in a row. The National Federation of Independent Business optimism index reached its highest level in a year, helped by an increase in expected sales.
The Standard & Poor's 500 index rose 24.87 points, or 1.8%, to 1,395.96. The S&P 500, a broad measure of the stock market, has already gained 11% this year, more than its average for a full calendar year. After such a strong start, can stocks go higher?
"Yes," said Brian Gendreau, market strategist at Cetera Financial. "Valuations are still very cheap."
Investors are paying 13 times the past year's earnings for the S&P 500 index. The long-term average is closer to 15. "Of course," Gendreau said, "stocks can stay cheap for a long time."
Sentiment in Europe was also boosted after Greece was cleared to get its next round of bailout cash, avoiding imminent bankruptcy.
Markets have done well this year on signs that Europe's debt crisis is abating and the U.S. economy is recovering faster than expected.
Dan Greenhaus, chief global strategist at BTIG LLC, said: "There is much to like in today's (retail sales) report if only because the revisions to January's data implies Q1 GDP could be a bit stronger than originally estimated" in reference to first-quarter economic growth.
In Europe, the FTSE 100 index of leading British shares was up 0.6% at 5,928 while Germany's DAX rose 0.9% to 6,962. The CAC-40 in France was 1% higher too at 3,524.
Earlier in Asia, South Korea's Kospi rose 1.1% to 2,025.04 but Hong Kong's Hang Seng added 1% to 21,339.70.
The Nikkei 225 index in Japan closed less than 0.1% higher at 9,899.08 with trading little-affected by the Bank of Japan's decision to keep its benchmark interest rate unchanged at zero to 0.1%. Japan's central bank also said it is allowing companies in areas struck by a disastrous earthquake and tsunami in March 2011 an extra year to pay back debts and adding more money to lending to encourage growth.
Oil prices gave up some earlier gains, with benchmark oil for April delivery down 32 cents to $106.02 per barrel in electronic trading on the New York Mercantile Exchange.
Among companies making big moves:
-- Great Wolf Resorts (WOLF) jumped 26% to $5.13. Apollo Global Management said it has agreed to buy the indoor water park operator for $5 a share.
-- Urban Outfitters(URBN) plunged 5.2%, the worst drop in the S&P 500 index. The retailer reported earnings that fell below what analysts were expecting after it had to mark down prices on women's clothing at its Anthropologie and Urban Outfitters stores.
-- Carmike Cinemas (CKEC) soared 17%. The Georgia-based movie theater chain reported earnings and sales that far outpaced what Wall Street analysts had expected.