New High for Dow

The major indices use a late rally to close to the upside.
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Updated from 4:13 p.m. EST

Stocks rallied late and closed higher Tuesday after the

S&P 500

rose through a key technical level and a

Federal Reserve

banker offered encouraging commentary on interest rates.

The Dow Jones Industrial Average finished at another all-time high, advancing 86.13 points, or 0.71%, to 12,218.01. The index was aided by gains of 4.2% in Home Depot (HD) - Get Report and Intel (INTC) - Get Report.

The S&P 500 rose 8.80 points, or 0.64%, to 1393.22, reaching its best level in six years as it surpassed a resistance point at 1389. The

Nasdaq Composite

added 24.28 points, or 1.01%, to 2430.66.

About 3.08 billion shares changed hands on the

New York Stock Exchange

, and volume on the Nasdaq was roughly 1.95 billion shares. Winners outpaced losers roughly 2 to 1.

By sector, semiconductor stocks were the big winners of the session. The Philadelphia Semiconductor Sector Index rose 2.8%. Precious metal stocks were among the hardest hit, with the Philadelphia Gold & Silver Index losing 1.1%.

Helping to lift equities was St. Louis Fed President William Poole, who said in a speech that rate policy is probably about right, suggesting the central bank will continue to remain on pause.

For months, traders essentially have been in one of two camps. One group believes a slowdown is good because it means the Fed will stop raising rates. With that uncertainty removed, these investors are more willing to commit capital to the market.

Meanwhile, the other side feels that the central bank's two-year rate-hiking campaign has gone too far and set the economy on a path toward a severe downward slide, making investments in stocks too risky.

Prior to Poole¿s comments, the indices were choppy as traders contended with soft economic data and mixed earnings forecasts. In one government report, the Labor Department said the producer price index for October sank 1.6%, registering the biggest drop in five years. Expectations were for a decline of 0.5%.

The core index, which excludes food and energy prices, fell 0.9%, far below expectations of a 0.1% rise. The core rate saw its biggest decline since August 1993.

Also on the economic docket, the Commerce Department said retail sales fell 0.2% in October, following a revised 0.8% decrease in September. Economists had anticipated a 0.4% decline. The headline number was hampered by a fall in sales at gas stations, which dropped 6% for the month. Excluding autos, retail sales were lower by 0.4%, compared with expectations of a 0.3% dip.

The data swing the pendulum back toward the doves in the debate about the Fed's next interest rate move. Policymakers have said incoming economic numbers are their primary focus in the run-up to their next meeting on Dec. 12.

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Following the economic releases and Poole's comments, the benchmark 10-year note rose 12/32 in price, yielding 4.56%. The dollar was declining against the euro and the yen.

As for the PPI report, Barry Hyman, an equity market strategist with EKN Financial, said it isn't perceived by professional traders as a consistent inflation measure.

"Investors are waiting for the more realistic consumer price index on Thursday, which is a better gauge of inflationary pressures," he said. "The strength in the bond market is telling us there is no soft landing. The bond market has been telling us for months that we're in for a hard landing."

On the corporate front,

Wal-Mart's

(WMT) - Get Report

struggles continued. The world's biggest retailer posted third-quarter sales of $2.6 billion, or 63 cents a share, up 11% from a year ago. Excluding items, the company earned 62 cents a share, beating the Thomson First Call consensus by 3 cents.

However, Wal-Mart said net sales totaled $83.5 billion in the third quarter, falling short of estimates. Still, shares finished higher by $1.34, or 2.9%, at $47.66.

Rival

Target

(TGT) - Get Report

reported third-quarter earnings of $506 million, or 59 cents a share, up from $435 million, or 49 cents a share, in the year-ago quarter. Results easily beat the estimate for a profit of 55 cents a share. Target gained $1.40, or 2.4%, to $59.16.

Home Depot missed third-quarter targets after reporting earnings of $1.49 billion, or 73 cents a share. Results were below the average estimate of 75 cents a share. The home-improvement retailer cited the effects of the housing market slowdown.

Home Depot said sales rose 11% to $23.09 billion, falling short of estimates. After spending most of the session in negative territory, shares jumped $1.56, or 4.3%, to close at $37.96.

Among other retailers reporting results,

Staples

(SPLS)

matched estimates, while

BJ's Wholesale Club

(BJ) - Get Report

beat expectations.

American Eagle

(AEOS)

beat third-quarter earnings and revenue targets and provided fourth-quarter guidance that was ahead of Wall Street forecasts.

Outside of retail, homebuilder

D.R. Horton

(DHI) - Get Report

posted fiscal fourth-quarter earnings of $277.7 million, or 88 cents a share, down 51% from a year ago. Revenue dipped to $4.8 billion from $5.02 billion a year ago. Analysts expected EPS of 69 cents on revenue of $3.9 billion. Shares of D.R. Horton added $2.12, or 9.5%, to $24.50.

Automaker

Ford

(F) - Get Report

restated earnings for the third quarter, narrowing its loss by $550 million. The restated results also showed that 2005's loss was pared by about $250 million to $7 billion. Ford lost 7 cents, or 0.8%, to close at $8.80.

Separately, executives from Ford,

General Motors

(GM) - Get Report

and

DaimlerChrysler

(DCX)

met with President Bush in Washington to discuss potential ways the government might help the domestic auto industry regain its footing.

Crude futures extended a two-session decline that has dropped prices by more than 4%. The December contract reversed early strength and finished down 30 cents to $58.28 a barrel. Precious metals were mixed, with gold futures dipping by 50 cents to $625.30 and silver tacking on 0.5 cents to close at $12.89 an ounce.

Overseas, European markets lost ground. London's FTSE 100 was down 0.2% to 6182, and Frankfurt's Xetra DAX was off 0.1% to 6392. Asia's markets, on the other hand, rose overnight. The Nikkei jumped 1.7% at 16,289, and the Hang Seng tacked on 0.1% to 18,878.