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Stocks soared this afternoon, with the Dow Jones industrials rising more than 120 points, as a large buildup in the nation's energy inventories and increased consumer spending sent buyers back to the market.

The Energy Department reported an increase in distillate reserves -- heating oil and other derivative products -- of 2.3 million barrels, far higher than Wall Street expected. Gasoline and crude inventories also rose substantially.

The impact on crude futures was immediate -- a barrel of light crude was quoted at $47.30, down $1.83, on the New York Mercantile Exchange.

"Oil futures go down, stocks go up. I think that'll be a pattern for a long time, and the good news is that if we keep getting inventory reports like this, oil prices will be ready for a big correction downward," said Brian Belski, market strategist at Piper Jaffray. "Overall, this market has clearly turned to a growth mode over the past few months, and should continue to grow."

At 1 p.m., the Dow Jones industrial average was up 127.97, or 1.23 percent, at 10,555.99.

Broader stock indicators were sharply higher. The Standard & Poor's 500 index was up 14.19, or 1.21 percent, at 1,188.01, and the Nasdaq composite index gained 33.32, or 1.59 percent, to 2,130.13.

"The economy is doing well," said James Gribbell, who manages $1 billion for Babson Capital Management in Cambridge, Massachusetts. "Everyone is focused on finishing up the year on a positive note, I know a lot of people have been putting cash to work."

The good news on oil built on earlier economic reports, which showed an 0.7 percent rise in consumer spending in October, a better-than-expected showing and welcome news after a mediocre start to the holiday shopping season. The Commerce Department also reported an 0.6 percent rise in consumer incomes -- considered a key barometer of future spending.

Wall Street was also happy with the latest reading of the Institute for Supply Management's manufacturing index for November, which measures the nation's industrial activity. The index came in at 57.8, up from 56.8 in October and better than the 57 reading Wall Street expected. November marked the 18th straight month of growth for industrial activity.

The dollar was once again a concern, but was generally overlooked by investors in favor of the strong economic data. The dollar fell to a 12-year low against the British pound, while the euro continued its record-setting gains against the greenback.

Merger activity dominated company news, with Wellpoint Health Networks Inc. successfully completing its $16.5 billion merger with Anthem Inc., creating the nation's largest health insurer. Shares of the merged company, which will go by the name Wellpoint Inc. and trade under the ticker symbol WLP, were up $4.61 at $105.94.

Blockbuster Inc. rose 35 cents to $8.83 after it said it was willing to raise its takeover bid for rival video rental chain Hollywood Entertainment Corp. above its original $11.50 per share offer. Hollywood gained 23 cents to $12.92 on the news.

Dow component Pfizer Inc. climbed 54 cents to $28.31 after it said it would meet its 2004 profit targets, but stood to lose $14 billion in revenues over the next three years as patents on some of its products expire.

Cigna Inc. also issued projections for future profits, saying better-that-expected results in its health care business allowed the insurer to raise its profit targets for 2004 and 2005. Cigna surged $5.93 to $75.95.

Humana, the biggest manager of health plans for the U.S. military, climbed $2.73 to $27.55 after increasing its full-year earnings forecast. Humana said it will probably earn about $1.69 a share, up from its previous forecast of $1.66 to $1.69.

Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 742.39 million shares, compared with 577.17 million at the same point on Tuesday.

The Russell 2000 index of smaller companies was up 8.58, or 1.4 percent, at 642.35.

Overseas, Japan's Nikkei stock average fell 1.06 percent. In afternoon trading, Britain's FTSE 100 was up 0.69 percent, Germany's DAX index gained 1.45 percent, and France's CAC-40 climbed 1.14 percent.

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