Stocks soared Wednesday, with the Dow posting triple-digit gains, as investors welcomed an encouraging consumer spending report and a sharp decline in crude prices due to a large buildup in the nation's energy inventories.

The Dow Jones industrial average (search) rose 162.20, or 1.56 percent, to 10,590.22. It was the third-largest single-session point gain of 2004, and the Dow's best close since March 5. The Standard & Poor's 500 index (search) rose 17.55, or 1.5 percent, to 1,191.37, its best close since Aug. 7, 2001. The Nasdaq composite index (search) gained 41.42, or 1.98 percent, to 2,138.23 for its best closing since Jan. 26.

The buying took off immediately after the Energy Department (search) reported an increase in distillate reserves — heating oil and other derivative products — of 2.3 million barrels, far higher than Wall Street expected. Gasoline and crude inventories also rose substantially.

That triggered the largest single-day decline in crude oil futures in more than three years. The price of a barrel of light crude plummeted $3.64 to settle at $45.49, its lowest level since Sept. 16, on the New York Mercantile Exchange (search). Stocks climbed steadily through the session as oil prices tumbled.

"Oil prices are in our favor, finally, and it's also the time of year when people don't want to sell stocks, they want to buy stocks," said Scott Bleier, President of HybridInvestors.com, a stock market research advisory company.

"We're in the sweet spot in the calendar. November's been a spectacular month and December is starting off with a bang."

As crude prices slid, energy-related stocks fell, including the world's largest oil field services company, Schlumberger Ltd. (SLB), down about 3 percent at $63.63, and utility FirstEnergy Corp. (FE), which fell more than 6 percent to $39.48.

The good news on oil built on earlier economic reports, which showed an 0.7 percent rise in consumer spending in October, a better-than-expected showing and welcome news after a mediocre start to the holiday shopping season. The Commerce Department (search) also reported an 0.6 percent rise in consumer incomes — considered a key barometer of future spending.

Wall Street was also happy with the latest reading of the Institute for Supply Management's (search) manufacturing index for November, which measures the nation's industrial activity. The index came in at 57.8, up from 56.8 in October and better than the 57 reading Wall Street expected. November marked the 18th straight month of growth for industrial activity.

The dollar fell to a record low against the euro and a 12-year low versus sterling. The U.S. currency has been rattled by concerns about the U.S. current account gap and speculation that Washington is happy to see a weaker dollar.

Merger activity dominated company news, with Wellpoint Health Networks Inc. (WLP) successfully completing its $16.5 billion merger with Anthem Inc. (ATH), creating the nation's largest health insurer. Shares of the merged company, Wellpoint Inc., were up $4.47 at $105.80.

Blockbuster Inc. (BBI) rose 45 cents to $8.93 after it said it was willing to raise its takeover bid for rival video rental chain Hollywood Entertainment Corp. (HLYW) above its original $11.50 per share offer. Hollywood gained 24 cents to $12.93 on the news.

Intel Corp. (INTC) rose more than 3 percent, or 72 cents, to $23.10. Wall Street is expecting an upbeat business update from the world's largest chip maker after the market's close on Thursday.

Semiconductors were also helped by a 5.2 percent rise in Novellus Systems Inc. (NVLS), up $1.41 to $28.35 a day after the maker of semiconductor manufacturing equipment forecast fourth-quarter financial results at the high end of its previous targets. The Philadelphia Semiconductor Index rose 3.83 percent.

Dow component Pfizer Inc. (PFE) climbed 46 cents to $28.23 after it said it would meet its 2004 profit targets, but stood to lose $14 billion in revenues over the next three years as patents on some of its products expire.

Cigna Inc. (CI) also issued projections for future profits, saying better-that-expected results in its health care business allowed the insurer to raise its profit targets for 2004 and 2005. Cigna surged $5.78 to $75.80.

Trading was heavy, with 1.8 billion shares changing hands on the New York Stock Exchange, above the 1.4 billion daily average for last year. About 2.3 billion shares were traded on Nasdaq, above the 1.69 billion daily average last year.

Advancers outnumbered decliners on the NYSE and Nasdaq by about 2 to 1.

The Russell 2000 index of smaller companies was up 9.91, or 1.56 percent, at 643.68.

Overseas, Japan's Nikkei stock average fell 1.06 percent. In Europe, Britain's FTSE 100 closed up 0.69 percent, France's CAC-40 climbed 1.14 percent for the session, and Germany's DAX index gained 1.45 percent.

Reuters and The Associated Press contributed to this report.