Investors who watched bond yields reach nearly two-year highs last week were cheered as the yield on the 10-year Treasury note fell to 4.69 percent from 4.77 percent late yesterday. The credit markets reacted to signs of a moderating economy, particularly a Commerce Department report that February retail sales had the largest decline in six months.

The report raised hopes that the Federal Reserve will end its string of interest rate hikes in the near future.

Wall Street was pleased with another Commerce Department report, that U.S. business inventories rose 0.4 percent in January after a 0.8 percent advance in December. Sales also grew 8.5 percent. Because the pick-up in sales outstripped the growth in inventories, investors took this as a sign that more inventory investment could be coming.

Goldman's report of a 62 percent jump in first-quarter profits also lifted the market. The investment firm's own stock rose 6.2 percent.

The company's "explosive" earnings "bode well for the sector in general, and it's a sector that all investors are watching," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati.

The Dow rose 75.32, or 0.68 percent, to 11,151.34. That was the highest close for the Dow since it stood at 11,175.84 on June 5, 2001.

Broader stock indicators rose. The Standard & Poor's 500 index rose 13.35, or 1.04 percent, to 1,297.48, achieving its highest close since May 22, 2001, when it reached 1,309.38. The Nasdaq composite index rose 28.87, or 1.27 percent, to 2,295.90.

The dollar was mixed against other major currencies. Gold prices were higher. Crude oil futures rose. A barrel of light crude settled at $63, up $1.23, in trading on the New York Mercantile Exchange.

Analysts, noting Wall Street's erratic performance in recent weeks, said the market was ready for an advance.

Alfred E. Goldman, chief market strategist for A.G. Edwards & Sons Inc. said, "We had enough of a correction, we have a lot of sideline cash, buyers just decided to get off their hands and spend some money."

In another economic report, the Commerce Department said the U.S. current account deficit, the broadest measure of the country's international trade, surged to a record $804.9 billion in 2005 as the United States went deeper into debt to foreigners.

The deficit was worrisome; it was a record not only in dollar terms but also as a percentage of the total economy at 6.4 percent of output, up from 5.7 percent in 2004. The deficit has widened as the United States has become more dependent on both foreign trade and foreign investment. Still, it didn't appear to affect stocks, although investors have feared that if international buyers dump U.S. assets, stock and bonds could fall sharply, interest rates could rise and the dollar could swoon.

In company news, Goldman rose $8.70 to $149.42 after record revenues in investment banking, fixed income trading and asset management led other areas, helping the company to results that far outstripped Wall Street's forecasts.

Procter & Gamble Co., maker of household products including Pampers diapers, Tide detergent and Pantene shampoo, moved its fiscal third-quarter guidance yesterday slightly more to the high end of its forecast and raised its quarterly dividend. But the company also slightly narrowed a sales growth projection for the quarter and its stock fell $1.97 to $60.01.

The McClatchy Co. dropped for a second straight session, falling 38 cents to $51.17 after it agreed yesterday to buy 32 Knight Ridder Inc. newspapers for $4.5 billion. McClatchy said it would sell a dozen of Knight Ridder's papers, including those in St. Paul, Duluth, Philadelphia and Grand Forks, N.D. Knight Ridder rose 30 cents to $64.22.

Anheuser-Busch Cos. rose 71 cents to $43.33 after Deutsche Bank and Bear Stearns upgraded the stock, saying sales and prices appear to be rising.

U.S. technology services company Unisys Corp. rose 26 cents to $6.91 after its Japanese affiliate, Nihon Unisys Ltd., said Unisys plans to sell its entire 27.8 percent stake in the Japanese company.

Advancing issues led decliners by nearly 3 to 1 on the New York Stock Exchange, where volume was 1.56 billion shares, up from 1.51 billion at the same time yesterday.

The Russell 2000 index of smaller companies rose 8.06, or 1.11 percent, to 736.10.

Overseas, Japan's Nikkei stock average fell 0.75 percent. Britain's FTSE 100 fell 0.04 percent, Germany's DAX index rose 0.27 percent, and France's CAC-40 gained 0.19 percent.