"The buyers got the upper hand today as stability in bonds and momentum from yesterday took hold," said Eliot Spar, market strategist at Ryan Beck & Co. The Dow rallied 187 points on Wednesday for its best one-day gain since July of 2006.
The Dow Jones Industrial Average gained 71 points to close at 13,553, as 23 of its 30 components advanced, led by AT&T Inc. , Intel Corp. , Alcoa Inc. , Caterpillar Inc. , and Exxon Mobil Corp. .
Among other Dow components, General Motors Corp. gained 4.7%. The Detroit News reported that Delphi Corp. and former parent GM are "very close" to reaching a deal with the United Auto Workers that would provide a cash payout to Delphi workers in exchange for lower hourly wages.
United Technologies Corp. rose 0.8% after the company raised its quarterly dividend by 21%, to 32 cents a share.
Away from blue chips, Wall Street bank Goldman Sachs fell 3.4%, while Bear Stearns rose fractionally, after both firms' quarterly earnings fueled concern about their subprime mortgage businesses.
The S&P 500 index gained 7.3 points to 1,522, while the Nasdaq Composite rose 17.1 points to 2,599.
Trading volumes showed 1.4 billion shares trading on the New York Stock Exchange and 1.9 billion trading on the Nasdaq stock market. Advancing issues topped decliners by 21 to 11 on the NYSE and by 17 to 11 on the Nasdaq.
By sector, oil , natural gas , and gold led the gains, while broker-dealers were among the few sectors losing ground.
The energy sector was buoyed by rallying energy prices amid declines in U.S. refinery activity. Crude oil prices rallied 2% to $67.65 a barrel.
Shares of homebuilders managed to shrug off news that a record number of U.S. homeowners entered the foreclosure process during the first quarter. Shares of KB Home , Hovnanian advanced, while Toll Brothers retreated.
Stocks have been under pressure amid rising bond yields since last week, as the yield of the benchmark 10-year Treasury bond topped 5%. Higher yields pressure stocks by offering a risk-free alternative to bonds, while lifting borrowing costs for consumers and businesses.
But the benchmark 10-year Treasury bond seemd to stabilize on Thursday.
After trading higher earlier, the bond finished down 4/32 at 94 16/32, while its yield, which moves inversely, rose to 5.216%.
Bonds earlier advanced, sending yields lower, as yields in Europe seemed to stabilize in the wake of tame eurozone consumer prices.
News that U.S. producer prices rose a bigger-than-expected 0.9% in May failed to lift yields further.
Excluding food and energy, producer prices rose 0.2%. Economists surveyed by MarketWatch had been looking for smaller increases of 0.6% on the headline PPI and 0.1% for the core PPI.
"The core number carries a lot more weight than the headline," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. "This helped alleviate people's concerns about inflation."
Inflation normally erodes the value of fixed-income assets such as bonds, pressuring their price and lifting their yields. But U.S. yields have partly been rising to stay competitive with global yields, which have also risen.
Stocks also rallied on Wednesday, with the Dow industrials surging 187 points, as bond yields fell in the wake of an economic survey suggesting moderate growth and little inflation in the U.S.
"The biggest concerns in the market right now are higher interest rates and inflation," said Art Hogan, chief market strategist at Jefferies & Co. "The PPI report could be broadly defined as being benign. This should be enough to keep market participants cam. They will look for confirmation tomorrow in the [consumer prices] report."
Stocks on the move
Bear Stearns rose fractionally. Concerns about its hedge fund exposure to mortgage-backed bonds have weighed on shares recently. The bank's second-quarter earnings fell below year-earlier levels due to a special charge.
Goldman Sachs fell 3.4%, after reporting quarterly earnings that beat expectations and exceeded the year-earlier result.
Colgate-Palmolive fell 0.9% after the company found counterfeit versions of Colgate toothpaste in four states.
Shares of Dow Jones , publisher of this report, fell 2.1% after UBS downgraded the stock to reduce from neutral, on the belief that another suitor won't emerge with a takeover offer that trumps the current $60-a-share bid from News Corp. .
The dollar rallied to a new four-and-a-half year peak against the yen but lost some ground against the euro.
Crude-oil futures rallied $1.39 to $67.65 a barrel.
Gold futures advanced, tracking crude oil prices. The August futures contract gained $3.20 to close at $655.90 an ounce.
By Nick Godt