Stocks rose sharply Tuesday, fueled by surging retail sales data, better-than-expected earnings from No. 1 retailer Wal-Mart Stores Inc. and growing investor confidence in the semiconductor sector. 

Stocks closed near their session highs. The Dow Jones industrial average jumped 189.24 points, or 1.87 percent, to 10,298.90, according to the latest data. The broader Standard & Poor's 500 Index was up 22.72 points, or 2.11 percent, at 1,097.28. The technology-loaded Nasdaq Composite Index climbed 66.52 points, or 4.03 percent, to close at 1,719.06.

"The consumer never laid back from spending, even in the recession. And the technology sector is really carrying the market as well," said Stanley Nabi, managing director at Credit Suisse Asset Management. "But one has to look at things with a bit of balance. If the market continues this way, it will be all dressed up with nowhere to go."

Retail sales jumped 1.2 percent in April, the largest monthly gain since October. Wal-Mart (WMT), the world's largest retailer, logged an almost 20 percent gain in quarterly profits on its expanding food sales, and said it is still on track for a hefty rise in full-year earnings.

After the financial markets closed, Applied Materials Inc. (AMAT), the world's biggest maker of semiconductor equipment and a technology bellwether, reported a quarterly profit and topped its own forecast of order growth. The results indicated the computer chip sector is seeing a rebound, and spurred a further rise in technology stocks after the bell.

"This is very good news for the stock market overall," said David Rolfe, chief investment officer at Wedgewood Partners Inc. "When these types of companies are seeing orders, it can only be interpreted as good news. The market has needed an improved outlook."

Embattled long-distance telephone provider WorldCom Inc. (WCOM) set a one-day record for Nasdaq trading volume, with about 640.6 million shares trading hands, including after-hours activity so far -- smashing the daily record of 308.7 million shares set by Intel Corp. on Sept. 22, 2000.

WorldCom's stock fell 20 cents to $1.24 after Standard & Poor's dropped it from the benchmark S&P 500 index and investors speculated the company may need to restructure its $32 billion debt load or even seek bankruptcy protection.

Investor sentiment got a lift after a bullish investment call on Intel, the world's largest maker of computer chips. Retailers, semiconductor companies and software makers helped push the market higher, adding to Monday's rally, which was fed by hopes for solid earnings from companies like Applied Materials.

Applied Materials (AMAT) tacked on a gain of $1.06, or 4 percent, closing at $26.64, adding to a 7 percent gain a day earlier. The stock hit $28 in after-hours trading.

The market has endured weeks of selling on fears the economic rebound will prove anemic and fail to kick-start sliding corporate profits. April retail sales helped build confidence in the recovery, but experts caution the economy still is not poised for a quick take-off after slipping into a shallow recession last year.

"We still have a lot of wood to chop," said Michael Murphy, head of equity trading at Wachovia Securities. "Until people are convinced the economy's recovery has broadened, and until we start to see the corporate sector come up with some surprises on the upside -- then we can really set a positive tone."

The rally ignored surging energy prices, which often spark a stock selloff. Oil prices moved up nearly $1 for the first time since the days following the Sept. 11 attacks, signaling the market expects a drop in U.S. stockpiles.

Wal-Mart (WMT) rallied $2.35 to $57.39, boosting the Dow along with Home Depot Inc. (HD). The home improvement retailer followed the upward trend and jumped $2.36 to $47.98. The S&P retailing index climbed 4.13 percent.

J.C. Penney Co. (JCP) added $1.69 to $24.89. The retailer said quarterly profits more than doubled as its efforts to overhaul its department stores yielded higher sales at existing stores.

"The blowout numbers on retail sales are really making the bears go back to their statistical charts," said Alfred Kugel, senior investment strategist at Stein Roe Investment Counsel. "You have to really start thinking, maybe we are going to get this earnings recovery in the next few quarters that we were concerned about."

Intel (INTC) jumped $1.63 to $30.15. Wall Street investment bank Robertson Stephens raised its rating on the Dow stock to "buy" from "market perform" -- saying pricing for its chips should stabilize in the second half of the year.

The Philadelphia Stock Exchange semiconductor index surged 6.3 percent, a day after rising 5.9 percent on bullish analyst comments on Applied Materials. The chip sector is often viewed as the first high-tech sector to rebound in an economic recovery. Battered biotechnology firms also got a boost Tuesday, with the S&P biotechnology sector rallying 6.6 percent.

Stocks rallied Monday, lifting the Dow Jones industrial average over the 10,000 mark, as investors bet quarterly earnings reports of technology leaders like Applied Materials will point to a turnaround in the key computer chip sector.

Winners trounced losers by a ratio of more than 2 to 1 on the New York Stock Exchange and Nasdaq. Volume was heavy, with more than 1.41 billion shares changing hands on the Big Board and more than 2.54 billion on Nasdaq, in a sign the rally was broad based.

The Russell 2000 index rose 3.74 to 503.46.

Overseas, Japan's Nikkei stock average advanced 0.2 percent. In Europe, Germany's DAX index gained 1.5 percent, Britain's FTSE rose 0.7 percent, and France's CAC-40 increased 1.6 percent.

Reuters and the Associated Press contributed to this report.