The Dow, the stock market's best known indicator, soared 123.19, a gain of 1.05 percent, to 11,850.53, according to preliminary calculations. It was only Tuesday that the 30 blue chip stocks finally reached a new closing high for the first time in nearly seven years.
The impetus for Wednesday's big push higher was a growing feeling on Wall Street that the Fed might begin lowering rates soon. Investors appeared to take comfort from comments by Fed Chairman Ben Bernanke that the slowing housing market could be a drag on the economy, perhaps shaving 1 percent off of gross domestic product growth in the second half this year and into next year.
Brian Williamson, an equity trader at The Boston Company Asset Management, said Wall Street could also be taking its cues from economic reports.
"Maybe the market is thinking that the economic data will put the Fed on hold," he said.
The slowing housing market is a threat to the economy, and it likely will continue on a decline for between six and 18 months, Moody's Economy.com chief economist Mark Zandi tells CBS Radio News. At least 100 major metropolitan areas around the United States should see continued price declines for that time, Zandi predicts.
And in a conversation with CBS News correspondent Trish Regan, one of the first economists to predict this summer that the economy was heading toward recession said the housing market has the power to tip the scales.
"The bust in housing is severe enough itself that it could trigger a recession," said Nouriel Roubini, chairman of Roubini Global Economics, told Regan.
Investors are waiting for more clues about the economy in a speech by Federal Reserve Chairman Ben Bernanke, who is scheduled to speak on savings before the Economics Club of Washington.
Watch the interview.
In corporate news, Wal-Mart Stores Inc. fell 69 cents to $48.77 after saying its September sales at stores open at least a year, a closely watched measure of retail performance known as same-store sales, rose 1.3 percent, not 1.8 percent as the company had forecast. The world's largest retailer, which plans to release September sales figures Thursday, said it miscalculated when it issued its projection.
Biotechnology company ImClone Systems Inc. rose $1.85, or 6.81 percent, to $29.02 after saying an unidentified international pharmaceutical company was willing to make an all-stock offer of $36 per share for the company. ImClone also criticized financier Carl Icahn for rejecting the bid and advised shareholders to rebuff his efforts to wrest control of the company.
Automakers drew Wall Street's attention after The Wall Street Journal, citing an unnamed source, reported that the chief executives of GM and Nissan-Renault have called off talks on forming an alliance. Earlier in the day, Bear Stearns cut its rating on Ford Motor Co. to "Peer Perform" from "Outperform" and upgraded rival General Motors Corp. to "Peer Perform" from "Underperform." Ford was up 27 cents, or 3.28 percent, to $8.50, while GM, part of the Dow, was down 56 cents at $32.85.
With gas prices on the decline, sales of pickup trucks and SUVs are on the rise, CBS Radio News correspondent Jim Taylor reports. GM, Ford, Jeep and Toyota all reported increased large-vehicle sales for September.