Updated from 4:03 p.m. EDT

Equities rallied for the second straight day Tuesday, and the major averages closed near their session highs as investors cheered solid earnings reports and stronger-than-expected sales data from the retail sector.

The

Dow Jones Industrial Average ended with a gain of 189.24 points, or 1.9%, to 10,298.90. The

Nasdaq climbed 66.52 points, or 4%, to 1719.06, and the

S&P 500 added 22.72 points, or 2.1%, to 1097.28.

The Commerce Department said April

retail sales rose 1.2%, up from a 0.1% rise in March, marking the biggest increase since October. Economists, on average, were expecting sales to increase by 0.6%. Excluding the automobile industry, retail sales rose 1% in April.

On the corporate side of the equation,

Wal-Mart

(WMT) - Get Report

, the world's biggest retail outfit, said first-quarter profits topped estimates by a penny, rising 19.4% to $1.65 billion, or 37 cents a share, compared with $1.38 billion, or 31 cents a share, last year. Shares of the retail giant closed up 4.3% to $57.39.

Luxury jeweler

Tiffany

(TIF) - Get Report

recorded a 6% rise in quarterly profits, citing higher sales at its U.S. stores and an increased margin due to a "favorable sales mix and product sourcing efficiencies." The company posted net income of $32.7 million, or 22 cents a share, in line with raised expectations, compared with $30.7 million, or 20 cents a share, last year. Tiffany's shares added 0.8% to $40.10.

J.C. Penney

(JCP) - Get Report

easily beat estimates for its first quarter as efforts to revamp its department stores resulted in higher sales. The company posted a profit of $86 million, or 29 cents a share, compared with $41 million, or 13 cents a share, in the same period last year. Analysts were anticipating a profit of 25 cents a share. The stock climbed 7.3% to $24.89.

In the semiconductor sector, Robertson Stephens raised its investment rating on chip heavyweight

Intel

(INTC) - Get Report

to buy from market perform and set a 12-month price target of $34. The shares rose 6% to $30.15 on the news. The chip group was stronger, as the Philadelphia Stock Exchange Semiconductor Index jumped 6.3%.

Meanwhile,

Flextronics

(FLEX) - Get Report

, a provider of electronics manufacturing services, announced it will purchase two factories from Japan's Casio Computer for an undisclosed amount. Casio said it would hand over production at the two plants, one in Japan and one in Malaysia, by the end of July. Flextronics also won a three-year contract to produce a wide range of Casio products, according to a press release. Flextronics climbed 9.4% to $15.41.

Shares of troubled telecommunications giant

WorldCom

(WCOM)

traded down 14% to finish at $1.24 after Standard & Poor's dropped the company from its benchmark S&P 500 Index. The stock has dropped 90% year to date.

US Airways

(U) - Get Report

was also removed from the index and lost 4.4% to $2.85.

Apollo Group

(APOL)

and

BJ Services

(BJS)

will replace WorldCom and US Air.

The biggest loser of the day was

Emisphere

(EMIS)

, which plunged more than 51% to $5.80 after its oral version of blood-thinning agent heparin failed to improve on an existing product in a late-stage clinical trial.

After the close Monday

eSpeed

(ESPD)

, the Cantor Fitzgerald spinoff, posted a first-quarter profit of $6.3 million, or 11 cents a share, reversing a loss of $2.3 million, or 4 cents a share, a year earlier. The results exceeded analysts' expectations by 2 cents. Cantor Fitzgerald was decimated by the terrorist attacks on the World Trade Center as over 700 employees lost their lives on Sept. 11. After a strong performance in the prior session, the stock lost 11% Tuesday.

Elsewhere, David Duncan, the government's star witness in the Arthur Andersen criminal trial, told jurors Monday that he ordered subordinates to follow Andersen's "document-retention policy," knowing the instruction would direct them to destroy -- not save -- papers related to the firm's audits of Enron,

The Wall Street Journal

reported.

U.S. Treasury issues were sharply lower. The 10-year note was losing 17/32 to 96 27/32, yielding 5.29%. The long bond was the weakest issue, falling almost a point.

Overseas markets were mostly higher, with London's FTSE 100 up 0.7% to 5240 and Germany's Xetra DAX adding 1.5% to 5049. Japan's Nikkei 225 finished up 0.2% at 11,356, while Hong Kong's Hang Seng closed down 0.4% to 11,690.