Recent events such as the Dow jumping past the 10,000 milestone and the weekend capture of fallen Iraqi leader Saddam Hussein have boosted investor confidence, but some concerns remain, said Stephen Carl, head of equity trading at The Williams Capital Group.

"The long-term economic numbers are strengthening, which I think is good, so now let’s see if the corporate numbers remain favorable," Carl said. "If we can get the moon and all the stars lined up right, we could see a very good start to the next year."

With most of the blue-chip industrial stocks performing well in late-day trading, the Dow was up 109.18, or 1.1 percent, at 10,132.00 — its highest level in nearly 19 months. It last closed higher on May 23, 2002, when it ended the day at 10,216.08.

The broader markets were also higher. The Standard & Poor’s 500 index was up 7.35, or 0.7 percent, at 1,075.39. The tech-heavy Nasdaq composite, edged higher in the final hour of trading after seeing earlier declines, gaining 6.13, or 0.3 percent, to 1,924.39.

The Russell 2000 index, which tracks smaller company stocks, also gained ground late in the session, up 1.29, or 0.2 percent, at 536.54. The Nasdaq and the Russell have been under pressure as investors shift their focus to large-cap value companies.

Investors welcomed news from the Federal Reserve that industrial production rose 0.9 percent in November, well beyond analyst expectations. It was the strongest reading since October 1999, and signaled that the worst may be over for the nation’s battered manufacturing sector.

"Industrial production was the single biggest surprise," said Mark Vitner, an economist with Wachovia Corp. in Charlotte, N.C. "It suggests not only is the rate of the increase in production accelerating, but a broader assortment of industries are seeing an improvement, and that tells me the recovery is much more durable than some might have thought."

Separately, the Labor Department reported a 0.2 percent dip in its Consumer Price Index, the government’s most closely watched inflation barometer. Economists were forecasting a tiny 0.1 percent advance.

The November CPI reading, pulled down by cheaper gasoline, clothing and airfare costs, offered fresh evidence that inflation won’t be much of a problem as the economy continues to improve. Economists said it bolsters the case for the Federal Reserve to leave interest rates low for some time.

Also Tuesday, the Commerce Department said construction of new homes and apartments rose 4.5 percent in November, to an annual rate of 2.07 million units — the fastest building pace in nearly two decades.

Several floor trading companies declined late in the day on news that the California Public Employees’ Retirement System had filed suit against the New York Stock Exchange, alleging seven "specialist" firms have engaged in fraudulent practices. LaBranche & Co. was down 88 cents at $9.15, and Van der Moolen Specialists declined 70 cents to $8.00.

Wal-Mart Stores Inc. was up 66 cents at $51.40 after a rough session yesterday, when it saw sharp declines after reporting December same-store sales growth was tracking at the low end of its forecast.

Other retailers were under pressure, including Sears, Roebuck and Co. which was down 90 cents at $43.60 after it reported sales that were below forecasts. UBS downgraded Sears, questioning its discounting strategy, but the company hinted more bargains were ahead.

Shares of flash memory card makers fell on concerns about an excess supply of chip sets for the cards could drag pricing down. Sandisk Corp. lost $5.30 to $55.56, and Lexar Media Inc. was down $1.04 at $15.50.

Aerospace and defense contractor Honeywell International Inc. was down 46 cents at $30.37 after saying pension costs would continue to pull down earnings through 2005, despite improving sales at its four business units.

Advancing issues included Motorola Inc., up 48 cents at $13.27 after its board announced it had elected former Sun Microsystems Inc. executive Edward J. Zander as its new chief executive. Zander succeeds Christopher B. Galvin, who is retiring after a series of clashes with the board.

Oracle Corp. was up 51 cents at $13.21 after issuing an upbeat financial report that beat analyst expectations by a penny a share. The high-tech bellwether’s report indicates companies are slowly starting to spend more on business software.

Advancers outnumbered decliners about 5 to 4 on the NYSE. Volume was at 1.15 billion shares, compared with 1.08 billion shares traded at the same point yesterday.