Wall Street shined for a second straight session on Thursday as strong earnings from Bear Stearns, cooler economic data, and comments from Federal Reserve Chairman Ben Bernanke encouraged investors. The Dow Jones industrial average gained nearly 200 points on the day.

The surge gave blue chips a gain of more than 300 points in the past two days following an extended sell-off in recent weeks, and pushed the Dow back over 11,000. The rise was also the Dow's best two-day run since April 2003.

The Nasdaq also had a strong day, posting its biggest one-day percentage gain in more than two years.

The Dow closed up 198.27 points, or 1.83 percent, at 11,015.19. The Standard & Poor's 500 Index was up 26.12 points, or 2.12 percent, at 1,256.16. The Nasdaq Composite Index was up 58.15 points, or 2.79 percent, at 2,144.15.

The Dow shed 186 points on Monday and Tuesday to fall into the red for the first time this year, but Wednesday's gains put the index back in positive territory.

Although the day's data gave mixed signals on economic growth, investors again brushed aside worries about inflation and interest rates following a month of selling that pulled the Dow down more than 8 percent. The Dow jumped 110 points Wednesday as investors came to terms with the likelihood that the Federal Reserve will hike rates later this month.

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The market turned sharply higher Thursday after Fed Chairman Ben Bernanke said record energy and commodity prices could account for some of the recent uptick in core prices but that inflation expectations have remained within historical ranges.

"The reason it's up isn't so much that (Bernanke) said anything, it's what he didn't say," said Jim Paulsen, chief investment strategist with Wells Capital Management in Minneapolis, Minnesota. "Leading up to this people thought he might be more hawkish," given recent data showing an uptick in inflation.

But despite recent signs of a slowing economy, analysts say inflationary pressures remain a risk and that higher interest rates could put a serious dent in economic growth. The Fed has said it would sacrifice growth to keep prices from rising.

"The Fed still may have to tighten further, potentially beyond the increase expected at the end of June," said Stuart Schweitzer, global markets strategist at JPMorgan Asset and Wealth Management. "To stop them in August, we will have to see a more decisive slowdown in growth."

Bonds slumped as stocks rose, with the yield on the 10-year Treasury note at 5.1 percent from 5.06 percent late Wednesday. However, the continued inversion of short- and long-term yields signaled investor expectations of a slowing economy.

Wall Street's Wednesday recovery led overseas stock markets higher. Japan's Nikkei stock average gained 1.13 percent; Britain's FTSE 100 added 2.04 percent, Germany's DAX index climbed 2.19 percent and France's CAC-40 was higher by 2.36 percent.

Crude futures saw another day of gains after the government reported a larger-than-expected drop in U.S. oil reserves as refineries stepped up output to meet summer gasoline demand. A barrel of light crude climbed 41 cents to $69.55 on the New York Mercantile Exchange.

The U.S. dollar drifted against the Japanese yen and European currencies. Gold prices rebounded to about $570 an ounce.

Despite two days of sturdy gains, some analysts were skeptical about whether Wall Street has finally reversed course. Stocks are expected to remain volatile until the Fed issues its opinion on the economy's health at the June 28-29 policy meeting.

"I think the market is trying to look beyond any day's set of numbers and the next Fed comment and try to get a real assessment of how this inflection point in the economy is going to play out," said Jerry Webman, chief economist of Oppenheimer Funds. "The crosswinds are blowing in different directions — the question is how far they're going to push us."

In economic news, traders focused on data showing May industrial production fell 0.1 percent, below estimates for a 0.2 percent rise and down sharply from a 0.8 percent jump the month before. The Fed also said capacity utilization fell slightly to 81.7 percent.

Other reports showed mixed readings on regional manufacturing for June. The Federal Reserve Bank of New York's Empire State index surged to 29 from 12.9 the month before, while the Federal Reserve Bank of Philadelphia said manufacturing activity slowed to 13.1 from 14.4 in May.

The Labor Department also said first-time jobless claims dipped by 8,000 to 295,000 last week, although analysts maintained expectations for the job market to weaken in the coming months.

In corporate news, Bear Stearns' quarterly profit grew 83 percent to easily beat Wall Street estimates, lifted by strength in equity trading and fixed-income revenue. Bear Stearns (BSC)swelled $6.27 to $130.47.

Goldman Sachs Group Inc. (GS), which on Tuesday also posted outstanding earnings, boosted its offer for Associated British Ports Holdings PLC to about $4.8 billion, which was matched by Australia-based Macquarie Bank Ltd. in an intensifying bidding war. Goldman Sachs gained $4.88 to $143.38.

General Mills Inc. (GIS) tumbled $1.31 to $50.15 after the cereal and snack food maker lifted its 2006 forecast but said 2007 profit growth would be hindered by expenses. Citigroup cut General Mills to "Hold" on its outlook.

Advancing issues topped decliners by more than 4 to 1 on the New York Stock Exchange, where volume of 1.44 billion shares trailed the 1.51 billion shares changing hands at the same point Wednesday.

The Russell 2000 index of smaller companies rose 22.06, or 3.26 percent, to 699.15.

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Reuters and the Associated Press contributed to this report.