Boeing Co. led the blue chips after winning a $2.3 billion order from FedEx Corp. Strong quarterly reports from both Toyota Motor Corp. and Emerson Electric Co. also lent strength to the market.

The broad advance came as investors bought optimistically ahead of an election that could strip power from Republicans in the House of Representatives for the first time since 1994. Stocks often rally on elections as Wall Street bets change will lead to an environment more favorable to business; the theory on the Street is that a split in power in Washington will create legislative gridlock, slowing down regulatory change.

"Gridlock is good, Wall Street doesn't like change," said Charles Gabriel, senior Washington analyst for Prudential Securities. "You're not going to have runaway spending increases, you won't have a repeal of the Bush tax cuts, and there's no legislative change that will roil industries. The green light is on for equity investments because you've got protection against any major changes."

The Dow rose 51.22, or 0.42 percent, to 12,156.77, building on yesterday's 119-point gain. The index of 30 large-cap stocks rose to as high as 12,196.32 earlier in today's session, surpassing its previous trading high of 12,167.02.

Broader stock indexes also advanced. The Standard & Poor's 500 index rose 3.06, or 0.22 percent, to 1,382.84, and the Nasdaq composite index added 9.93, or 0.42 percent, to 2,375.88.

Bonds gained, with the yield on the benchmark 10-year Treasury note falling to 4.66 percent from 4.70 percent late yesterday. The dollar was mixed against other major currencies, while gold prices rose.

Oil prices again dipped below the $60 mark. A barrel of light sweet crude declined $1.09 to $58.93.

The jump in stocks comes after the Dow had its best day in a month yesterday, soaring as a spate of merger announcements soothed investors who worried last week about an economic slowdown. The two-day rally shows investors remain resilient, and feel the market still has more room to advance.

"I think the move we're seeing this week is that perhaps this might not be a weak economy after all," said Brian Gendreau, investment strategist for ING Investment Management. "It isn't clear what the catalyst would be to make the market go significantly up or down for the balance of the year. One could be the housing market, but I don't think that would even have a broad effect on stocks."

Investors were able to shrug off fresh evidence of a further slowing of the housing market. Both Toll Brothers Inc. and Beazer Homes USA Inc. handed Wall Street disappointing quarterly results, and a sour outlook for next year.

Toll Brothers fell 1 cent to $28.04 after it forecast a 10 percent drop in quarterly home building revenue. Beazer Homes posted a 44 percent decline in fourth-quarter earnings due to lower demand for new homes, and said there was significant discounting in most markets. However, investors pushed shares up 13 cents to $42.07.

Boeing rose $4.37, or 5.4 percent, to $84.85 after FedEx announced it will acquire 15 new 777 freighter aircraft, with options to double that order. FedEx said it decided to buy the Boeing aircraft came after rival Airbus announced significant delays for delivery of its A380 jets. FedEx shares rose $1.09 to $115.03.

Toyota rose $1.48 to $121.21 after the automaker reported that strong sales in North America and Europe drove profits higher during its fiscal second quarter. The results helped put the company on pace to overtake General Motors Corp. as the world's biggest automaker.

Emerson rose $4.87, or 5.9 percent, to $87.43 after the diversified manufacturer posted strong fourth-quarter results, raised its dividend and announced a stock split. The company also said it expects a double-digit profit increase in 2007.

The Russell 2000 index of smaller companies was up 1.31, or 0.17 percent, at 764.39.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.61 billion shares compared to 1.52 billion yesterday.