The gains were surprising given some bad news from DaimlerChrysler, which warned of a big loss in its struggling Chrysler division, and the fact that stocks were primed for a pullback following weeks of heavy buying.

"People are now looking for reasons to buy stocks, not sell them," said Michael Murphy, head trader at Wachovia Securities in Baltimore.

"The great three-year bear market looks like it's coming to an end," said Rod Smyth, chief investment strategist at Wachovia Securities Inc.

In its fourth straight advance, the Dow closed up 116.03, or 1.3 percent, to 9,038.98. It was the first time the Dow finished above 9,000 since Aug. 22, when it stood at 9,053.64.

In the past four sessions, the Dow has gained nearly 330 points.

The market's broader indicators also climbed. The Nasdaq composite index, already trading at levels not seen in more than a year, rose 31.09, or 1.9 percent, to 1,634.65.

The Standard & Poor's 500 index advanced 14.68, or 1.5 percent, to 986.24.

Buyers have dominated the market for nearly three months, as companies reported better-than-anticipated first-quarter earnings, the war with Iraq turned out to be quick and economic data have strengthened.

Since March 11, when the rallies began, the Dow has risen 20.1 percent, the Nasdaq has gained 28.6 percent and the S&P has increased by 23.2 percent.

The Institute for Supply Management reported today that activity in the service sector grew at a faster-than-expected pace in May, marking the highest level in the indicator since the beginning of the year.

The ISM's non-manufacturing index jumped to 54.5 from 50.7 in April, while analysts had been expecting 51. Any figure above 50 indicates economic expansion.

Earlier today, the Labor Department reported that productivity, the output per hour of work, rose at an annual rate of 1.9 percent in the first three months of the year, slightly stronger than the 1.6 percent estimated a month ago.

Bob Armknecht, portfolio manager of the Liberty Equity Growth Fund at Columbia Management Advisors in Boston, said the stock market was gaining momentum as investors anticipate further signs of a recovery later this year.

"People have a sense that everything is there for things to get better," Armknecht said.

Yesterday, stocks rose on an upbeat assessment of the economy's prospects by Federal Reserve chairman Alan Greenspan. Speaking to a group of central bankers in Berlin, Greenspan said he saw signs of a "fairly marked turnaround" in the economy.

Among today's winners, Handspring Inc. rose 17 cents to $1.28 on news that the hand-held computer maker agreed to be bought by rival Palm Inc. Palm advanced $2.29 to $14.44.

Sprint PCS rose 62 cents to $4.87 after RBC Capital Markets upgraded its shares to "outperform" from "sector perform."

Intel advanced 28 cents to $21.38 ahead of its mid-quarter update due out tomorrow.

But DaimlerChrysler fell 90 cents to $30.75 after the company warned that its Chrysler division will likely post an operating loss of about $1.2 billion for the second quarter ­ a serious setback in the company's efforts to turn around the division. Chrysler's results are being hurt as the company offers deep incentives to auto buyers.

The stocks of other major automakers also declined as investors worried that the troubles could affect other parts of the industry. General Motors slipped 10 cents to $35.85, and Ford Motor fell 13 cents to $10.56.

Walt Disney Co. rose 96 cents to $20.72. Chief executive Michael Eisner said yesterday that the media company has no plans to sell its radio assets, which "everybody wants to buy."

Computer-related shares accounted for almost a quarter of the S&P 500's gain.

Electronic Data climbed $2.15, or 10 percent, to $22.97. The Plano, Texas-based company won a $350 million, seven-year contract from Barclays Plc, Britain's third-biggest bank, to manage and set up desktop computers.

Flextronics International Ltd., the biggest maker of electronics for other companies, climbed $1.35, or 13 percent, to $11.47. Chief executive Michael Marks said clients are more optimistic than they had been since a slump in demand began two years ago.

Advancing issues outnumbered decliners more than 3 to 1 on the New York Stock Exchange. Volume was moderate at 1.59 billion shares, up from 1.43 billion on Tuesday.

The Russell 2000 index, which tracks smaller company stocks, rose 7.36, or 1.7 percent, to 451.23.

Japan's Nikkei stock average finished down 0.1 percent. Britain's FTSE 100 closed up 0.3 percent, France's CAC-40 rose 0.8 percent and Germany's DAX index gained 1.8 percent.