U.S. stocks rallied on Tuesday, with the Dow posting its biggest gain this year, as oil fell to its 2006 low, helping shares of large energy consumers, and data showed stronger-than-expected retail sales, brightening the outlook for corporate earnings.

Robust quarterly reports from companies, including Waste Management Inc. (WMI), the largest U.S. trash hauler, and news of a dividend increase and a stock buyback by manufacturer 3M Co. (MMM) also bolstered shares.

The jump in stocks was spurred by "the combination of retail sales coming in higher than expected, and then oil going down, which hopefully will propel the consumer," said Jeff Schappe, chief investment office at BB&T Asset Management.

The Dow Jones industrial average was up 136.07 points, or 1.25 percent, at 11,028.39. The Standard & Poor's 500 Index was up 12.67 points, or 1.00 percent, at 1,275.53. The Nasdaq Composite Index was up 22.36 points, or 1.00 percent, at 2,262.17.

For the Dow, it was the biggest gain since October 28 on both a percentage and net basis.

Whether stocks can maintain the gains may depend on what investors can glean about the outlook for interest rates from new Federal Reserve Chairman Ben Bernanke's first congressional testimony this week, analysts said.

However, if Bernanke is seen as being more aggressive about interest-rate increases, then "the bond market will get whacked, and they'll take the gains right back out of stocks," said Jeffrey Saut, chief investment strategist at Raymond James Financial.

Bernanke, who took over from Alan Greenspan on February 1, will deliver the U.S. central bank's semi-annual report on monetary policy over two days, beginning with a House panel on Wednesday.

Crude for March delivery fell $1.67 to settle at $59.57 a barrel, the first drop for U.S. oil futures below the $60 mark since late December. Gasoline futures touched their lowest since March, while heating oil slipped to its cheapest since November 30.

On Wednesday, the government is expected to report that crude inventories rose again in the latest week.

Stocks of large energy consumers like heavy equipment maker Caterpillar Inc. (CAT) and aluminum producer Alcoa Inc. (AA) were among the Dow's best performers as fuel prices slipped.

Shares of Caterpillar climbed 2.3 percent, or $1.60, to $70.22 and Alcoa's stock advanced 3.7 percent, or $1.13, to $31.37, both in NYSE trading.

Transportation stocks also shot up as energy prices fell. Trucker J.B. Hunt Transport Services Inc.'s shares (JBHT) rose 3.1 percent, or 77 cents, to $25.46.

The Dow Jones Transportation Index (DJT) climbed 2.6 percent.

The Commerce Department reported that January retail sales rose 2.3 percent, helped by warm weather and holiday gift-card redemptions. Economists had forecast a rise of 0.8 percent.

An S&P index of retail stocks (RLX) rose nearly 2 percent.

On Nasdaq, Intel Corp. (INTC) and Apple Computer Inc. (AAPL) shares gained after Apple said that this week, it will begin shipping its new MacBook Pro laptop computers loaded with more powerful Intel processors than previously announced.

Intel rose 1.1 percent, or 24 cents, to $21.37, and Apple gained 4.5 percent, or $2.94, to $67.65.

3M was among the Dow's top gainers after it announced an increase in its quarterly dividend and a share-repurchase authorization. 3M shares rose 1.1 percent, or 79 cents, to $73.70.

Shares of Waste Management rose 1.2 percent, or 39 cents, to $33.43, after it posted a stronger-than-expected increase in quarterly profit as it pushed through higher prices.

Also on the earnings front, Playboy Enterprises Inc. (PLA) on Tuesday posted a 68 percent drop in quarterly profit, but it gave an upbeat forecast for 2006.

Playboy shares rose 4.9 percent, or 68 cents, to $14.68 on the NYSE.

Trading was active on the NYSE, with about 1.82 billion shares changing hands, above last year's daily average of 1.61 billion, while on Nasdaq, about 1.84 billion shares traded, slightly above last year's daily average of 1.80 billion.

Advancing stocks outnumbered declining ones by a ratio of more than 2 to 1 on the NYSE and by nearly 2 to 1 on Nasdaq.