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Stocks rallied for a third day Wednesday, jumping more than 1 percent, as industrial production rose for a second straight month and weakness in the dollar boosted commodity and industrial stocks.
The Dow Jones Industrial Average shot up 108.30, or 1.1 percent, to close at 9,791.71, bringing its three-day total to 2.6 percent. The S&P 500 and Nasdaq each gained 1.5 percent today.
All three major indexes hit new highs for the year, topping the highs set on Tuesday. The S&P is now up about 60 percent from its March 9 low.
A better-than-expected reading on the manufacturing sector added to optimism about the recovery following Fed Chairman Ben Bernanke's comment Tuesday that the U.S. economic recession was probably over.
Industrial production rose 0.8 percent in August, better than expected, and the prior month was revised to a 1 percent gain — double the 0.5 percent originally reported. The increase was led by automakers, which ramped up production to meet "Clunkers" demand.
Analysts were encouraged by the fact that it was the second straight gain but were skeptical that the pace would hold after the "Clunkers" glow wears off.
"[W]e believe that the recovery process will be subdued and uneven as the household sector continues to struggle with ravaged balance sheets and lingering labor market weakness," Joshua Shapiro, chief U.S. economist at MFR Inc., wrote in a note to clients.
"It is interesting to note that minutes before today’s industrial production report, Ford [F Loading... ()] was on the tape saying that September automotive sales had started off 'soft,' and that it is uncertain whether the economy is really on the mend," Shapiro said.
The U.S. market was little fazed by consumer-price data for August, particularly when excluding gasoline prices. Though prices at the pump jumped 9.1 percent in August, core CPI was a tepid 0.1 percent. And mortgage applications declined last week, perhaps due to a slight uptick in interest rates or the Labor Day holiday.
The dollar dropped to a nearly one-year lows against the euro and other currencies as optimism about the recovery diminished the appeal of a safe-haven bet like the dollar. The dollar is now worth $1.4731 euro; earlier, the euro hit $1.4736, the highst since last September.
The dollar's slide gave a boost to industrial and commodity stocks.
General Electric [GE Loading... ()] was among the beneficiaries. GE shares finished at $17 today, a day after an analyst raised his price target on the stock to $17 from $16, citing strength at the company's NBC Universal unit, which is the parent of CNBC. Once the stock broke through $15, analysts said, buying momentum just continued to soar.
Industrials continued to lead the rally, with Alcoa and DuPont up near the top of the Dow.
But today, financials also nudged their way up there, with American Express, Bank of America and JPMorgan all in the Dow's top five.
There are among the nearly 150 new highs on the New York Stock Exchange, which is the most since last September. IBM shares [IBM Loading... ()] broke above $120, finishing at $121.82.
The price of crude oil [US@CL.1 Loading... ()] settled above $72 a barrel after the EIA reported that crude supplies fell by 4.729 million barrels last week, more than double of what was expected.
Anadarko Petroleum [APC Loading... ()] shares jumped nearly 10 percent after the company said it had made a major oil discovery off Sierra Leone. Rival energy exploration companies also rose, including Chesapeake and XTO.
Gold rallied to $1,018.90 an ounce, a new closing high on the Comex.
Citigroup [C Loading... ()] shares bounced back 2 percent after sliding nearly 9 percent on Tuesday following news that the government may withdraw some of its 34-percent stake in the firm and that Citi might launch a $5 billion secondary offering.
Some of the financial sector's biggest gainers today were Hartford Financial, which jumped 11 percnet, and Bank of New York Mellon, which gained nearly 7 percent.
Merger and acquisition activity continues to pick up.
Adobe Systems [ADBE
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] announced late Tuesday that it is buying software firm Omniture in a deal valued at $1.8 billion. The news came with Adobe's earnings report, which beat expectations. Adobe shares fell 6.4 percent.
And Bristol-Myers Squibb [BMY Loading... ()] said it will sell Asia rights to over-the-counter drugs, as well as its Indonesian unit, to Japan's Taisho Pharmaceutical for $310 million. The moved marked Bristol's seventh deal in an effort to focus on prescription drugs. Bristol-Myers shares rose nearly 1 percent.
Shares of Dow component Verizon [VZ Loading... ()] skidded 1.9 percent after UBS downgraded the company to "neutral" from "buy." The telecom faces general pressures on the wireless business, UBS said.
Genworth Financial [GNW Loading... ()] shares jumped more than 9 percent to close at $13.14, after the company priced an offering of 48 million shares at $11.75 each, and said 7.2 million more shares would be available to underwriters if there is strong demand. The company's shares have been on a meteoric rise since the market's March cratering, when they traded as low as 78 cents.
Volume was above average, with about 1.58 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 5 to 1.
Still to come:
WEDNESDAY: Earnings from Oracle [ORCL
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THURSDAY: Housing starts; weekly jobless claims; Philly Fed; Earnings from FedEx [FDX
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FRIDAY: Quadruple witching
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