Analysts said investors were generally feeling upbeat after strong gains in the previous two weeks and were putting aside fears ­ at least temporarily ­ that Wall Street's current advance is a bear-market rally that will give up its gains.

"The market definitely has been feeling the path of least resistance in the upward direction. It's almost a regardless-of-the-news type of rally," said Arthur Hogan, chief market analyst at Jefferies & Co.

"The broader market is definitely in rally mode, and today is no different. We're basically having a drift up," he said.

The Dow Jones industrial average climbed 126.65, or 1.5 percent, to close at 8,443.99, according to preliminary calculations. That came after dropping 176.93 points yesterday on investor concerns that a rally in the previous two weeks was too much.

The broader markets also finished higher. The Nasdaq composite index rose 32.41, or 2.5 percent, to 1,331.12. The Standard & Poor's 500 index gained 15.15, or 1.7 percent, to 897.65.

All three gauges had their third-consecutive winning week. The Dow finished the week up 1.5 percent, while the Nasdaq rose 3.4 percent and the S&P climbed 1.5 percent.

The Commerce Department reported that new home sales rose 0.4 percent last month to a seasonally adjusted annual rate of

1.021 million, the highest rate on record. Economists predict 2002 will be the best year ever in terms of sales of both new and existing homes.

But another Commerce Department report showed a sharp 5.9 percent decline last month in orders to U.S. factories for durable goods. The drop, the biggest in 10 months, was much larger than the 2 percent decline analysts were expecting.

And the University of Michigan reported that consumer sentiment for the month decreased to 80.6 from 86.1 last month, the lowest level since 1993, according to Dow Jones Newswires. Economists were expecting a reading of 81.3.

Analysts say investors have become more hopeful after the two-week rally on better-than-expected earnings boosted stocks. Since hitting a five-year low on Oct. 9, the Dow has gained more than 1,000 points.

But stocks remain vulnerable to bouts of profit-taking as investors worry about the market's long-term recovery. Lingering uncertainties including a possible war with Iraq and the strength of the market also continue to pressure the market, analysts said.

Gainers included Starbucks, which jumped $1.48 to $23.93, after the coffee retailer slightly raised its guidance for the fourth quarter and the full year.

Household International rose $1.26 to $24.09 after the consumer finance company said it raised $900 million in two securities offerings.

Pharmaceutical companies got a boost after Lehman Brothers upgraded their stocks. Wyeth gained $1.24 to $34.50, and Schering Plough jumped $1.23 to $20.35.

Amazon dropped 56 cents to $19.30 after reporting a narrower third-quarter loss.

Advancing issues outnumbered decliners nearly 2 to 1 on the New York Stock Exchange. Volume was light. The Russell 2000 index, which tracks smaller company stocks, rose 6.61, or 1.8 percent, to 372.63.