The Dow Jones industrial average jumped 123 points to a second straight record close Wednesday in a rally driven by optimism about the outlook for interest rates and profits.

The blue-chip Dow average rose 123.11 points, or 1.05 percent, to end at 11,850.45 — above Tuesday's previous record close of 11,727.34. That level topped the previous intraday record of 11,750.28, set on Jan. 14, 2000, during the Internet stock craze. The market crashed two months later.

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For the second day in a row, the Dow also hit an all-time intraday high, rising to 11,851.25.

The Standard & Poor's 500 Index was up 16.11 points, or 1.21 percent, to finish at 1,350.22, which also marked its 5-1/2-year high. The Nasdaq Composite Index was up 47.30 points, or 2.11 percent, to close at 2,290.95.

Weaker-than-expected services data reaffirmed views the Federal Reserve will keep interest rates unchanged.

Leading the Dow's surge were shares of Boeing Co. (BA), as well as International Business Machines Corp. (IBM), Altria Group (MO), Procter & Gamble Co. (PG) and Exxon Mobil (XOM) Corp.

The Nasdaq gained more than 2 percent, rising to its highest level in five months, while the Standard & Poor's 500 jumped more than 1 percent and hit a fresh 5-1/2-month high. Both had their biggest one-day gains in a month and a half.

"Now that the S&P is up 8 percent (for the year), and you have the Dow making new highs, you have to remember the old Wall Street adage: The Dow industrials are the generals, and once the generals push through to the fore, then the troops play catch up," said Mike Driscoll, a Bear Stearns listed trader in New York.

Shares of Boeing gained 2.7 percent, or $2.18, to $83.96, while shares of IBM rose 1.8 percent, or $1.45, to $83.10 and shares of Altria advanced 1.7 percent, or $1.26, to $76.90, all in New York Stock Exchange trading.

P&G's stock was up 1.7 percent, or $1.04, at $63.34 and Exxon Mobil's stock was up 1.8 percent, or $1.20, at $66.61.

The market rose early in the day after the Institute for Supply Management said its gauge of the services sector, which accounts for about 80 percent of the U.S. economy, slipped in September more than economists had expected. In addition, the index's prices-paid component fell sharply, calming inflation fears.

Helping to extend market gains in afternoon trading, Fed Chairman Ben Bernanke said while the central bank is worried inflation is too high, it is also watching to see how much a "substantial correction" in housing markets will slow economic growth.

Financial markets expect the Fed to keep benchmark overnight interest rates unchanged at its next meeting on Oct. 24-25 and through the end of the year.

On the Nasdaq, Nvidia Corp. (NVE) shares shot up 9.8 percent, or $2.78, to $31.08 amid speculation the graphics chip maker could be acquired by Intel Corp. (INTC).

Shares of Intel rose 1.2 percent, or 25 cents, to $20.82.

Shares of Ford Motor Co. rose 4 percent, or 33 cents, to $8.56 on the NYSE after General Motors Corp. , Renault SA and Nissan Motor Co. said they had broken off talks over a proposed alliance, leaving Renault-Nissan free to pursue another partner, possibly Ford. GM shares declined 0.2 percent, or 5 cents, to $33.36.

Rebounding after two days of heavy losses, November delivery crude gained 73 cents to settle at $59.41 per barrel, on violence in Nigeria. It hit a high for the day of $59.75.

Trading was heavy on the NYSE, with about 1.86 billion shares changing hands, above last year's daily average of 1.61 billion, while on Nasdaq, about 2.24 billion shares traded, above last year's daily average of 1.80 billion.

Advancing stocks outnumbered declining ones by a ratio of almost 4 to 1 on the NYSE and by nearly 3 to 1 on Nasdaq.

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