August retail sales showed a surprising 2.7 percent gain, compared to expectations of 1.9 percent. Also surprising was that the gain -- without auto sales and gasoline -- was 0.6 percent, a half-point above expectations.
The Empire State survey was also a positive, climbing to 18.88, its highest level since 2007 and up sharply from August's 12.08. The producer price index rose 1.7 percent after falling in July though core prices posted just a slight gain.
Bernanke said that the recession appears to be technically over, but that the recovery will be sluggish and the job picture remains weak. That comment fueled optimism about the economic recovery, sending the dollar to a year low and pushing commodities higher.
Gold finished at $1,006.30 an ounce, and oil rose 3 percent to $70.93 per barrel. The dollar was down 0.4 percent against the euro to $1.4676. The bond market, meanwhile. saw sellers, pushing the yield on the 10-year to 3.454 percent.
Wednesday's data includes the consumer price index at 8:30 am New York time; industrial production at 9:15 am and Treasury's international capital flows at 9 am. In corporate news, Oracle reports earnings after the bell.
Barton Biggs, who appeared on CNBC's "Closing Bell," said he's "unfashionably" bullish, and it's time to be fully invested.
"I think we're going to keep going up and we're going to get to 1,200-1,250 before we get a meaningful correction," he said.
"This market has absolutely no respect. Everybody thinks it's gone too far," said Biggs, of Traxis Partners. "We're getting all kinds of advice to cut back and lock in some gains. That's a prudent thing to do. And I think it takes courage to be a pig, and I'm a pig here."
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Stocks have not yet realized the gains made by the credit markets, and it is difficult right now to be precise with forecasts for earnings and free cash flow valuations because conditions are changing rapidly, Biggs said.
"By the criteria we use, stocks clearly aren't as cheap as they were three months ago, four months ago, but they are still very cheap compared to where they've been in the past," he said.
Jack Ablin, chief investment officer at Harris Private Bank, agrees stocks should keep heading higher. In a note Tuesday, he said the economy is running a marathon, but it's fueled by doughnuts in the form of fiscal stimulus and only about a tenth have been consumed.
"The upshot is there's certainly a lot of hand wringing going on about the stimulus and that we're stealing from the future," he said in an interview. "... Every month, I look out about 12 to 18 months. I think there's enough stimulus to create an economic tail wind."
That tailwind will help stocks and as the market moves higher, the huge amount of cash on the sidelines will be drawn in, Ablin added.
"The only other thing that could upset the apple cart is swine flu," he said. "If indeed half the population gets it, that could be a real issue for growth."
Strategists and economists are currently shrugging it off, and it is already influencing the economy, he said.
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