NEW YORK (CNNMoney) -- U.S. stocks rallied late Tuesday to close sharply higher on news that most of the nation's largest banks have passed the government's latest test of their financial health.
The Dow Jones Industrial average (INDU) rose 218 points, or 1.8%, to close at 13,177. It was the highest close since Dec. 31, 2007, when Dow closed at 13,264.82.
The S&P 500 (SPX) added 25 points, or 1.8%, to 1,396.
The Nasdaq (COMP) jumped 56 points, or 1.9%, to 3,040. It was the highest closing level since Nov. 15, 2000.
Stocks surged in the final hour of trade after JPMorgan Chase (JPM, Fortune 500) said the Federal Reserve had approved its capital plans for the year.
JPMorgan made the disclosure in announcing plans to raise its dividend payment to 30 cents a share and buy back $15 billion in stock.
The Fed subsequently released the results of its so-called bank stress tests late Tuesday, two days ahead of schedule. The tests are designed to assess banks' ability to withstand a significant financial shock or economic downturn.
The Fed said 15 of the 19 banks it tested had sufficient capital levels.
Earlier, stocks were supported by a solid report on retail sales, which raised hopes that higher gas prices will not dent consumer spending. Investors also welcomed a more upbeat assessment of the economy from the Federal Reserve.
The central bank said the job market has improved, consumer spending has increased and inflation is under control despite higher oil and gas prices.
But the Fed warned that the housing market remains "depressed" and that the economy remains vulnerable to "strains" in global financial markets.
As expected, the Fed's Open Market Committee voted to keep interest rates near zero.
"It's clear to everyone that the Fed is on hold for foreseeable future," said Doug Roberts, chief market strategist for Channel Capital Research and author of Follow the Fed to Investment Success.
Roberts said stocks are now "in the sweet spot" between the Fed's accommodative policies and an economy that's on the mend.
"This is a liquidity driven rally," he said. "As long as the Fed continues to print money, the market can continue to go higher."
Kavanagh said stocks will probably keep climbing as economic conditions improve and corporate profits continue rising, albeit at a slower pace. In addition, he said the market remains relatively cheap, with stock valuations below their long-term averages.
The dollar strengthened against the euro and the Japanese yen, but lost ground against the British pound.
Oil for April delivery rose 37 cents to settle at $106.71 a barrel.
Gold futures for April delivery lost $5.60 to end at $1,694.20 an ounce.
The Dow Jones Industrial average (INDU) rose 218 points, or 1.8%, to close at 13,177. It was the highest close since Dec. 31, 2007, when Dow closed at 13,264.82.
The S&P 500 (SPX) added 25 points, or 1.8%, to 1,396.
The Nasdaq (COMP) jumped 56 points, or 1.9%, to 3,040. It was the highest closing level since Nov. 15, 2000.
Stocks surged in the final hour of trade after JPMorgan Chase (JPM, Fortune 500) said the Federal Reserve had approved its capital plans for the year.
JPMorgan made the disclosure in announcing plans to raise its dividend payment to 30 cents a share and buy back $15 billion in stock.
The Fed subsequently released the results of its so-called bank stress tests late Tuesday, two days ahead of schedule. The tests are designed to assess banks' ability to withstand a significant financial shock or economic downturn.
The Fed said 15 of the 19 banks it tested had sufficient capital levels.
Earlier, stocks were supported by a solid report on retail sales, which raised hopes that higher gas prices will not dent consumer spending. Investors also welcomed a more upbeat assessment of the economy from the Federal Reserve.
The central bank said the job market has improved, consumer spending has increased and inflation is under control despite higher oil and gas prices.
But the Fed warned that the housing market remains "depressed" and that the economy remains vulnerable to "strains" in global financial markets.
As expected, the Fed's Open Market Committee voted to keep interest rates near zero.
"It's clear to everyone that the Fed is on hold for foreseeable future," said Doug Roberts, chief market strategist for Channel Capital Research and author of Follow the Fed to Investment Success.
Roberts said stocks are now "in the sweet spot" between the Fed's accommodative policies and an economy that's on the mend.
"This is a liquidity driven rally," he said. "As long as the Fed continues to print money, the market can continue to go higher."
Kavanagh said stocks will probably keep climbing as economic conditions improve and corporate profits continue rising, albeit at a slower pace. In addition, he said the market remains relatively cheap, with stock valuations below their long-term averages.
The dollar strengthened against the euro and the Japanese yen, but lost ground against the British pound.
Oil for April delivery rose 37 cents to settle at $106.71 a barrel.
Gold futures for April delivery lost $5.60 to end at $1,694.20 an ounce.
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