Wall Street embraced a report that the manufacturing sector expanded at a slower pace in November. The report, from the Federal Reserve Bank of Philadelphia, showed that prices in the region's manufacturing sector were steady or falling.

Earlier, industrial output data cheered investors. Output from manufacturing, mines and utilities rose a healthy 0.9 percent last month as refineries and oil and natural gas platforms began production again after widespread shutdowns caused by hurricanes Katrina and Rita. The data quelled concerns that the hurricanes had done lasting damage to the economy.

"A lot of uncertainties have been removed," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research. Questions about the economic after effects of the hurricanes appear settled, as does their effects on corporate earnings and the issue of who will lead the Federal Reserve.

"The market did bottom in late October," Paris said. "We are having the fourth-quarter rally people are looking for. ... After going up three weeks in a row, going sideways would be good news."

Falling oil prices also boosted stocks. A barrel of light crude settled at $56.34, down $1.54 on the New York Mercantile Exchange and its lowest level since June 15.

According to preliminary calculations, the Nasdaq rose 32.53, or 1.49 percent, to 2,220.46, just surpassing its previous 52-week high, reached in July. The Standard & Poor's 500 index rose 11.59, or 0.94 percent, to 1,242.80.

The Dow Jones industrial average rose 45.46, or 0.43 percent, to 10,720.22. The Dow lagged the other major indicators after being held back by component Altria Group Inc., which fell on a Goldman Sachs downgrade.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.46 percent, down from 4.47 percent late yesterday. The U.S. dollar was mixed against other major currencies in European trading. Gold prices were higher.

There was some sense on Wall Street that the longed-for fourth-quarter rally had begun.

"It looks like buyers are stepping back in," said Nick Perry, equities options analyst at Schaffer's Investment Research. "People get emboldened by the price action and pile on top of each other."

Technology stocks have led previous rallies and anyone watching Google Inc.'s stock cross $400 a share yesterday could only hope this time would be no different.

"Traders remember that the big rally from last year was driven by the Nasdaq," Paris said. "They say, 'Let's gamble on it."'

In company news, Google rose $5.30 to $403.45 after a bullish report from Piper Jaffray's well-respected Internet analyst said a new service, called Google Base, could "create massive advertising inventory for Google."

Altria fell $2.11, or 2.9 percent, to $71.78, after Goldman Sachs said the company's planned break-up may come much late than expected. The stock's decline put a cap on the Dow's rise until late afternoon, when the rest of the index pushed higher.

Applied Materials Inc. fell 43 cents to $17.34 after the company, the world's largest maker of semiconductor gear, said its profit fell 46 percent in its fiscal fourth-quarter.

General Motors Corp. rose $1.34 to $22.63 after hitting an 18-year low yesterday. News reports that GM CEO Rick Wagoner posted a letter on the company's internal Web site assuring employees that GM's finances are sound lifted the stock, which has been falling on worries that the United Auto Workers could strike at Delphi Corp., GM's largest supplier.

Barnes & Noble Inc., the nation's leading bookseller, rose $1.53 to $39.98 after it said it had a slim profit in the third quarter, down sharply from a year ago but beating analysts' expectations, and boosted its profit outlook for the full year.

The Russell 2000 index of smaller companies rose 12.50, or 1.91 percent, to 667.14.

Advancing issues led decliners by almost 3 to 1 on the New York Stock Exchange where volume was 1.59 billion shares, down from 1.69 billion yesterday.

Overseas, Japan's Nikkei stock average rallied to 4 1/2-year highs, rising 1.70 percent. A weaker yen versus the dollar stokes demand for Japanese exports to the U.S., helping auto makers and electronics companies.

Britain's FTSE 100 rose 0.55 percent, Germany's DAX index rose 0.36 percent, and France's CAC-40 rose 0.24 percent.