Stocks jumped to their highest levels in nearly three years Tuesday, thanks to signs that earnings are rising for U.S. companies, and consumers are feeling more confident about the economy. The Russell 2000, the benchmark index of small companies, neared a record high.
The new highs continue a historic recovery in the stock market. Stock indexes have more than doubled since hitting a 12-year low in March 2009. The fastest bull market since the 1950s has now erased most of the losses stemming from the financial crisis.
Investors who bought at the top of the market in 2007 have now lost 4.2 percent, including reinvested dividends. Analysts predict stocks will continue to rise if unemployment keeps falling and global demand leads to more profit growth.
The Standard and Poor's 500 index -- the benchmark for most mutual funds -- reached its highest level since June 2008. It gained 11.99 points, or 0.9 percent, to 1,347.24. It's still 16 percent below the record high of 1,565 it reached in October 2007.
The Dow Jones industrial average also marked a new high for the year, rising 115.49 points, or 0.9 percent, to 12,595.37. The Nasdaq composite rose 21.66 points, or 0.8 percent, to 2,847.54.
The Russell 2000 rose 1 percent to 853.04, near the record high of 855.77 that it reached in July 2007.
Better-than-expected earnings reports from companies ranging from airlines to office products manufacturers helped drive a broad rally that included all 10 company groups that make up the S&P index. Industrial companies gained nearly 2 percent, the most of any group.
Delta Air Lines Inc. jumped 11 percent after reporting a loss that was far smaller than investors had expected.
Cummins Inc. gained 8 percent after the engine maker raised its earnings forecast for the year because of strong demand. United Parcel Service Inc. rose 1 percent after raising its own earnings estimate for the year.
"What we're seeing now is a positive reinforcement of the fact that demand is rising around the world," said Quincy Krosby, chief market strategist at Prudential Financial. That's despite the fact that some companies say rising costs are hurting their profits, Krosby said.
Ford Motor Co. rose nearly 1 percent after the carmaker reported its best first quarter earnings since 1998. Ford beat Wall Street's earnings estimates with stronger sales of new vehicles. 3M Co., the maker of Post-Its and Scotch Tape, rose 2 percent after it raised its full-year earnings expectations. The company said quarterly profit jumped 16 percent from a year ago, beating analysts' estimates.
Tuesday's gains continued a strong first-quarter earnings season. Nearly 8 in 10 companies in the S&P index that have reported earnings have fared better than analysts were expecting, according to Jonathan Golub, the chief U.S. stock strategist at UBS.
Stocks also got a lift from a report on consumer confidence that showed that worries about rising prices and unemployment eased in April. Among the encouraging signs, those who said jobs are "hard to get" dropped, while those who expected higher incomes rose.
The market's continued rebound is crucial to luring nervous Americans back into investing in stocks, said Alan Gayle, senior investment strategist at RidgeWorth Investments in Richmond, Va.
Gayle said he talks to a lot of retail investors who were burned when markets dropped in 2000 and 2008 and remain wary of putting their savings into stocks.
"The stock market in the last 10 years has disappointed a lot of investors," Gayle said. "There are some lasting scars there."
The Federal Reserve began a two-day meeting Tuesday. Economists expect the Fed will leave short-term interest rates unchanged and end its $600 billion bond-buying program in June as scheduled. The bond-buying effort has been credited with lifting financial markets since Fed Chairman Ben Bernanke first hinted at it last August.
Three stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume came to 4.1 billion shares.