The stock market's best-known indicator shot up almost 190 points Thursday to 9,069.29, its highest level since November, and all the big indexes gained more than 2 percent.
News that existing home sales rose in June for the third straight month and by a higher-than-expected amount led investors to extend a buying spree that has now lifted the Dow 923 points, or 11 percent, in just nine days.
The week's economic news and upbeat earnings reports and forecasts from companies including chip maker Intel Corp. and heavy equipment maker Caterpillar Inc. convinced investors that the bets they've placed since March on a recovering economy were well-founded.
Still, the economy, and in turn, the market, are likely to face more quicksand pits in the months ahead. Many more companies, including retailers, who are a barometer of consumer spending, have yet to announce second-quarter earnings. And many of the corporations that have already released their reports said they made money because they had cut costs so deeply, something that they can't keep doing indefinitely.
There was already some troubling earnings news after trading ended Thursday. Microsoft Corp. missed analysts' expectations for revenue, sending its shares lower in extended trading. American Express Co. and Amazon.com also traded lower after releasing their earnings.
Another ongoing problem is the banking business. Banks are forecasting that they'll continue to suffer losses from loans as consumers keep getting laid off.
But some analysts don't believe investors are caving in to euphoria.
"I don't think the market is signaling that we are fully healed at all but it is telling us that there is a strong likelihood that a recovery is under way," said Ciaran O'Kelly, head of equities, Americas, at Nomura Securities Intl. Inc. in New York.
Analysts also caution that volume remains relatively light, as is typical of the summer months when many traders take vacations. It's easier for the market to make big swings when there are fewer trades.
The Dow rose 188.03, or 2.1 percent, to 9,069.29. It was the highest finish for the blue chips since Nov. 5 and the first time the Dow has traded or closed above 9,000 since January. Even with the gains, the Dow is still far off its peak of 14,165 in October 2007.
The Standard & Poor's 500 index rose 22.22, or 2.3 percent, to 976.29. It hasn't traded or closed above 1,000 since early November.
The Nasdaq composite index rose 47.22, or 2.5 percent, to 1,973.60, its 12th straight advance. The Nasdaq hasn't had a rally that long since a streak that ended Jan. 8, 1992.
About five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.4 billion shares, compared with 1.1 billion Wednesday
Bond prices tumbled, pushing their yields higher, as money flowed back into the stock market and out of safe-haven investments. The yield on the benchmark 10-year Treasury note, which is closely tied to home mortgage rates, jumped to 3.67 percent from 3.55 percent late Wednesday.
The Realtors said sales of previously occupied homes rose 3.6 percent in June. Sales came in at 4.89 million, above the 4.84 million analysts expected.
Dealmaking also supported stocks. Investors look to companies' willingness to make acquisitions — and part with cash or take on debt — as a sign of confidence.
In health care, Bristol-Myers Squibb Co. plans to acquire Medarex Inc. for about $2.1 billion. Medarex surged $7.49, or 89 percent, to $15.89, while Bristol-Myers rose 57 cents, or 2.8 percent, to $20.86.
Amazon.com Inc. agreed to buy Zappos.com Inc., a privately held online shoe store, in a deal worth about $850 million. Amazon rose $5.08, or 5.7 percent, to $93.87. It tumbled to $87.58 after its earnings were released.
Among the day's earnings news, Ford Motor Co. announced a profit that was a huge improvement over the record $8.7 billion loss it reported a year earlier. Without one-time gains, the car maker would have lost $424 million, or 21 cents per share. That is still smaller than the loss of 50 cents per share analysts had been expecting. Ford rose 60 cents, or 9.4 percent, to $6.98.
Microsoft, which rose 76 cents to $25.56 in regular trading, fell to $23.62 in after-hours activity. American Express traded at $28.05 in extended trading after rising 69 cents to $29.45 during the day.
Some analysts warn that stocks won't be able to hold their gains if companies can't increase earnings by boosting revenue rather than slashing costs.
"It's like going on a diet. You can only starve yourself for so long," said Lawrence Creatura, portfolio manager at Federated Investors in Rochester, N.Y. "You cannot cost cut your way to prosperity."
Creatura noted that companies are reducing costs in large part by getting rid of workers. That could wind up hurting other businesses as the ranks of unemployed people grow. Unemployment is at a 26-year high of 9.5 percent, and the Federal Reserve predicts it will top 10 percent by year-end.
The dollar mostly fell against other major currencies, while gold prices dipped.
Oil prices rose $1.76 to settle at $67.16 a barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies gained 17.15, or 3.2 percent, to 545.85.
The gains in U.S. stocks pushed markets overseas sharply higher. Britain's FTSE 100 rose 1.5 percent, while Germany's DAX index jumped 2.5 percent and France's CAC-40 rose 2.1 percent. In Japan, where markets closed before U.S. stocks began trading, the Nikkei stock average rose 0.7 percent.