"People are more comfortable making the bet that you want to be an owner of stocks now and, more importantly, six months from now," said Matt Johnson, head of U.S. cash trading at Lehman Brothers.

Consumer spending and durable goods orders rose in October while weekly jobless claims fell to their lowest in 21 months, the government said in reports that boosted confidence in the economy. Other data showed business activity in the Midwest expanded in November, topping forecasts and bolstering the argument that the economy has crossed its soft patch.

The string of upbeat economic reports lured more buyers after a more than 22 percent rally in the Dow from 5-year lows carved out on Oct. 9. The Dow is headed toward its eighth winning week in a row, which would mark its longest streak of weekly gains since March 1998.

"People want to be bullish on stocks," said Brian Pears, head of equity trading at Victory Capital Management. "We are all looking for a reason to be hopeful for December after what's been a great November."

The Dow Jones industrial average (^DJI - news) leaped 256.35 points, or 2.95 percent, to 8,932.77, according to the latest available numbers, hitting its best level in more than three months. The Dow's gain topped a 2.5 percent surge in 1957 on the day before Thanksgiving, according to MarketHistory.com.

The technology-laced Nasdaq Composite Index (^IXIC - news) jumped 44.17 points, or 3.06 percent, to 1,488.59, scoring its highest level since June. The broad Standard & Poor's 500 Index (^SPX - news) climbed 25.65 points, or 2.81 percent, to 938.96.

Winners trounced losers by a ratio of about 3 to 1 on the New York Stock Exchange (news - web sites) and Nasdaq. More than 1.34 billion shares changed hands on the Big Board, surpassing volume the previous two years on the day before Thanksgiving. More than 1.70 billion shares traded on Nasdaq.

Investors scooped up a range of stocks on hopes that corporate profits would grow at a brisk pace in 2003. General Motors racked up $2.33, or more than 6 percent, to $39.99, leading the Dow higher. Financial giant Citigroup Inc. (NYSE:C - news) rallied $1.81, or almost 5 percent, to $38.91.

Entertainment giant Walt Disney Co. (NYSE:DIS - news) jumped 88 cents, or more than 4 percent, to $19.89. Intel climbed 70 cents, or more than 3 percent, to $20.90.

Investors are betting on positive sales out of retailers during the busy holiday season. Retailers generate roughly a quarter of their annual sales in November and December, and for many those months account for the bulk of profits.

Gap Inc. (NYSE:GPS - news), the largest U.S. specialty apparel retailer, shot up 84 cents, or more than 5 percent, to $15.79. Consumer electronics chain Circuit City Stores Inc. (NYSE:CC - news) tacked on 81 cents, or more than 9 percent, to $9.30.

Chip gear maker Novellus Systems Inc. (NasdaqNM:NVLS - news) jumped $2.95, or more than 8 percent, to $37.43, helping fuel a rally in the semiconductor sector. Novellus said bookings -- a closely watched indicator of demand -- may grow sequentially in the fourth quarter, reversing an earlier warning. The Philadelphia Stock Exchange semiconductor index (^SOXX - news) rallied 6.72 percent.

Computer maker Sun Microsystems Inc. (NasdaqNM:SUNW - news) rose 18 cents, or almost 5 percent, to $3.94. Its chief financial officer said the company's fiscal second-quarter revenue will be in line with analysts' forecasts of $2.92 billion.

Eli Lilly & Co. (NYSE:LLY - news) jumped $5, or more than 7 percent, to $69. U.S. regulators unexpectedly approved its new treatment for attention deficit hyperactivity disorder just hours after clearing the firm's new osteoporosis drug months earlier than expected.

Transkaryotic Therapies Inc. (NasdaqNM:TKTX - news) shares tumbled $4.66, or 32.7 percent, to $9.60, ranking as the top percentage loser on the Nasdaq. The drug maker said its Replagal compound for the treatment of kidney disease did not perform as expected in early clinical trials.

El Paso Corp. (NYSE:EP - news) eased 8 cents to $8.55 and topped the Big Board's most active list. Morgan Stanley cut its rating on shares of the largest U.S. pipeline company to "underweight" from "equal weight" and lowered its view of the natural gas industry to "cautious" from "in-line."