Strong retail sales lifts Nasdaq, Dow to new highs

MATTHEW CRAFT AP Business Writer Published:

NEW YORK (AP) -- A strong February retail sales report helped drive U.S. stocks to their biggest gains of the year Tuesday. Banks stocks jumped after JPMorgan Chase raised its dividend and said it would buy as much as $15 billion of its own stock.

The Nasdaq composite pushed back above 3,000 for the first time in two weeks, and the Dow Jones industrial average surged back above 13,000.

The Dow Jones industrial average gained 181 points to 13,141 just before 3:30 p.m. Eastern time. That's a gain of 1.4 percent. The Dow is headed for its biggest gain of the year and its first five-day winning streak since September.

JPMorgan Chase & Co. shot up 6.9 percent on news 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. The announcement sent other bank stocks higher. Citigroup jumped 6.5 percent and Goldman Sachs gained 5.7 percent.

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, though they could still pose a threat.

The Nasdaq composite index gained 47 points, or 1.6 percent, to 3,030. The Nasdaq broke through the 3,000 mark during the day on Feb. 29 but ended the day lower. The last time the index closed above that level was in December 2000.

Jack Ablin, chief investment officer at Harris Private Bank, said the key difference between then and now was that the technology companies that dominate the Nasdaq 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."

The Commerce Department said retail sales rose 1.1 percent last month, the 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.

The Standard & Poor's 500 index rose 21 points, or 1.6 percent, to 1,392.

The S&P 500, a broad measure of the stock market, has already gained 11 percent 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."

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.

Among companies making big moves:

-- Great Wolf Resorts jumped 26 percent to $5.13. Apollo Global Management said it has agreed to buy the indoor water park operator for $5 a share.

-- Urban Outfitters plunged 5.9 percent, 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 soared 16 percent. The Georgia-based movie theater chain reported earnings and sales that far outpaced what Wall Street analysts had expected.