Stocks moved steadily higher throughout the day after a mixed open. Phone and real estate companies made the largest gains, but the rally moved into high gear in the afternoon, as airlines, railroads and trucking companies soared.
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Investors took the rally in transportation stocks as a sign of optimism about economic growth. Technology and consumer-focused companies also jumped. Biotech drug companies took steep losses after President-elect Donald Trump said he wants to reduce drug prices.
The transportation sector reached an all-time high for the first time in two years. Julian Emanuel, an equity strategist for UBS, said investors were pleased to see that record because they see it as a sign businesses will start spending more, which would bolster economic growth.
"The consumer has really been the engine of the economy," he said. "The missing piece has been the corporate side, the industrial side."
The Dow Jones industrial average jumped 297.84 points, or 1.5 percent, to 19,549.62. The Standard & Poor's 500 index rose 29.12 points, or 1.3 percent, to 2,241.35. The Nasdaq composite recovered from an early loss to rise 60.76 points, or 1.1 percent, to 5,393.76. That was about five points short of its all-time high.
The Russell 2000 index of small-company stocks also recovered from an early loss and set its own a record as it gained 11.84 points, or 0.9 percent, to 1,364.51.
U.S. government bond prices rose, sending yields lower. The yield on the 10-year Treasury note fell to 2.34 percent from 2.39 percent. Bond yields have risen sharply since the summer but have slipped in the last few days.
The lower bond yields have helped stocks that are seen as bond substitutes, like real estate investment trusts. Their big dividends are attractive to investors who want income, so when bond yields fall, investors often turn to those stocks. Industrial real estate company Prologis rose $1.62, or 3.2 percent, to $52.32 and Verizon picked up $1.02, or 2 percent, to $51.38.
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AT&T also jumped as a Senate antitrust panel scrutinized its planned $85.4 billion purchase of Time Warner, the parent of HBO. Legislators asked if the deal would improve competition and reduce prices for consumers, as the companies say it will. AT&T gained $1.10, or 2.8 percent, to $40.45 and Time Warner edged up 8 cents to $93.98.
A wide array of companies that stand to benefit from faster economic growth also climbed. Home improvement retailer Lowe's rose $3.94, or 5.4 percent, to $76.40 and truck maker Paccar jumped $3.20, or 5 percent, to $67.63. U.S. Steel added $1.54, or 4.3 percent, to $37.49.
IBM led technology companies higher as it rose $4.44, or 2.8 percent, to $164.79. Hard drive maker Western Digital climbed $5.30, or 8.3 percent, to $69.15 after it extended a patient licensing deal with Samsung.
In an interview with Time magazine, which named him Person of the Year, the president-elect said he wants to reduce drug prices. He did not say how his administration plans to do that. Democratic nominee Hillary Clinton campaigned on reducing drug prices, and drug company stocks had rallied since the election as investors felt that was less likely to happen under Trump.
The Nasdaq biotechnology index tumbled 2.9 percent, as those companies make costly medications and might stand to lose the most under tighter price regulations. Amgen lost $3.92, or 2.7 percent, to $141.19 and Vertex Pharmaceuticals sank $2.80, or 3.6 percent, to $75.32.
Abbott Laboratories moved to terminate its purchase of diagnostic test maker Alere. Abbott agreed to buy Alere in February for about $5.8 billion, or $56 per share. But since then, Alere has recalled a key monitoring device and delayed a financial statement, and it's being investigated over its overseas business. Alere said Abbott's lawsuit is without merit.
Alere stock dropped $3.19, or 8 percent, to $36.67 and Abbott stock added 6 cents to $38.48.
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Benchmark U.S. crude oil lost $1.16, or 2.3 percent, to $49.77 a barrel in New York. Brent crude, the international standard, slid 93 cents, or 1.7 percent, to $53 a barrel in London. Energy companies traded higher Wednesday, although they rose less than the rest of the market.
European stock indexes jumped as investors anticipated that the European Central Bank will extend its bond-buying stimulus program Thursday. The stimulus is designed to boost growth and inflation. European stock indexes climbed. Germany's DAX gained 2 percent and the FTSE 100 in Britain rose 1.8 percent. The CAC 40 of France picked up 1.4 percent.
The dollar fell to 113.85 yen from 114.05 yen. The euro rose to $1.0759 from $1.0715.
In other energy trading, wholesale gasoline lost 3 cents to $1.51 per gallon. Heating oil slipped 2 cents to $1.62 a gallon. Natural gas fell 3 cents to $3.60 per 1,000 cubic feet.
Gold rose $7.40 to $1,177.50 an ounce. Silver jumped 47 cents to $17.28 an ounce. Copper dipped 4 cents to $2.64 a pound.
Japan's benchmark Nikkei 225 rose 0.7 percent and the South Korean Kospi inched up 0.1 percent. The Hang Seng in Hong Kong gained 0.5 percent.