why the dow moved up

NEW YORK (CNNMoney.com) - The Dow hung on to big gains Tuesday, closing above 11,000 for the first time in over a month as oil prices sank and strong retail sales proved that consumers' passion for spending still burns bright.

The Dow Jones industrial average (up 127.11 to 11,019.43, Charts) surged about 1.3 percent, early tallies showed.





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The Nasdaq composite (up 21.86 to 2,261.67, Charts) and the broader Standard & Poor's 500 (up 11.56 to 1,274.42, Charts) each climbed about 1 percent.

The last time the Dow closed above 11,000 was Jan. 11, when it finished at 11,043.44.

Moving near the close
Gains were broad-based, with 28 out of 30 Dow components rising.

Retailers made some of the biggest gains, with Home Depot (up $1.43 to $41.13, Research) jumping over 3 percent and Wal-Mart (up $0.85 to $46.36, Research) up around 2 percent on the solid sales numbers.

Other Dow movers include Alcoa (up $1.02 to $31.26, Research), which jumped about 3 percent, and DuPont (up $0.88 to $41.03, Research), Caterpillar (up $1.63 to $70.25, Research) and Verizon (up $0.57 to $33.51, Research), which each climbed about 2 percent.

And 3M (up $0.72 to $73.63, Research) climbed 1 percent after announcing late Monday that it was boosting its quarterly dividend to 46 cents a share and authorized the repurchasing of $2 billion in outstanding shares in 2006.

Financial stocks rose, pushing the Amex Securities Broker/Dealer (Charts) index up 1.5 percent.

On the downside, oil stocks continued to slump as prices fall, with the Amex Oil (down 8.00 to 1,017.81, Charts) index losing nearly 1 percent.

Falling oil and the belief that stocks are undervalued helped fuel the rally, said Tony Dwyer, an equity market analyst at FTN Midwest Research.

"What the market likes is oil at $59.75, it's as simple as that," said Dwyer.

U.S. light crude oil for March delivery sank $1.67, a drop of nearly 3 percent, to $59.57 a barrel on the New York Mercantile Exchange.

Dwyer also said the morning's strong retail numbers added to the excitement and helped dispel the notion that higher energy prices, interest rates or a housing bubble will hit personal spending.

"The whole consumer Armageddon argument against equities is wrong," he said. "Obviously, it's going to slow it down, but it's not the end of the world."

January retail sales jumped 2.3 percent -- the biggest gain since May 2004 -- topping economists' average forecasts, while sales excluding autos rose 2.2 percent, another surprisingly strong reading.

While the morning's retail sales report was welcomed, in other recent sessions strong economic news has caused worries about interest rates and inflation.

Tuesday's strong retail sales reports looked likely to propel economic growth to a rate of at least 5 percent for the quarter, Anthony Crescenzi, an analyst at Miller Tabak & Co., said in a research note.

That, he said, could cause a jump inflation.

The I-word will be on everyone's mind when new Fed chairman Ben Bernanke testifies before Congress Wednesday.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than two to one on volume of 1.4 billion shares. On the Nasdaq, advancers also topped decliners more than two to one on volume of 1.4 billion shares.

Treasury prices fell after the retail sales report, raising the yield on the 10-year note to 4.62 percent from 4.57 percent late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar slipped against the yen and fell slightly against the euro.

COMEX gold for April delivery rose $6.80 to $548.90 an ounce.

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