MARKET REPORT Stocks see biggest gains of year

NEW YORK — Bank stocks led a rally across the financial markets Tuesday, and all three major stock indexes posted their biggest gains of the year. The Dow Jones industrial average rose 217.97 points and closed at its highest level since the end of 2007.

The Nasdaq composite closed above 3,000 for the first time since December 2000, during the collapse in technology stocks.

The market rallied from the opening bell Tuesday after the government said February retail sales gains were the strongest since September. Americans spent more on cars, clothes and appliances.

The rally gained strength in the afternoon when the Federal Reserve said it saw signs of an improving economy and expected the unemployment rate to keep falling. The Fed also said strains in the global financial markets have eased.

Then Jpmorgan Chase, the country’s largest bank by assets, announced it plans to buy back as much as $15 billion of its stock and raise its quarterly dividend to 30 cents per share from 25 cents a share.

“That’s what really made the day,” said Jeffrey Kleintop, chief market strategist a LPL Financial.

The announcement came just before the Fed made a surprise announcement of the results of its annual stress test for banks. Jpmorgan Chase and 14 other financial institutions passed. Four, including Citigroup, failed.

The Fed had planned to release the results Thursday afternoon. But it moved up the announcement after Jpmorgan declared its dividend increase. The bank said it had the Fed’s blessing to raise the dividend.

Jpmorgan Chase’s stock gained 7 percent, and other banks followed. Citigroup and Goldman Sachs gained 6 percent. Banks were easily the best-performing stocks in the market, gaining almost 4 percent as a group.

Citigroup’s stock was down 4 percent in after-hours trading following the Fed announcement.

The Dow finished at 13,177.68, its highest close since Dec. 31, 2007. The close put the Dow within 1,000 points of its all-time record, 14,164.53, set less than three months earlier, Oct. 9, 2007.

The Nasdaq composite index rose 56.22 points, or 1.9 percent, to 3,039.88.

Jack Ablin, chief investment officer at Harris Private Bank, said the key difference between the Nasdaq then and now is that the technology companies that dominate the index only promised profits 12 years ago.

Today those profits are real. The Nasdaq’s largest companies are Apple, Microsoft and Google.

“The Nasdaq hasn’t done much of anything for 12 years, but it’s had a huge rally in earnings,” Ablin said.

The Standard & Poor’s 500 index closed up 24.87 points, or 1.8 percent, at 1,395.96, its highest level since June 5, 2008. The S&P has gained 11 percent since Jan. 1, more than what it posts in an average year.

Brian Gendreau, market strategist at Cetera Financial, said stocks could still go higher. Investors are paying roughly 13 times the past year’s earnings for the S&P 500 index. The long-term average is closer to 15.

“Valuations are still very cheap,” he said.

Advancing stocks outnumbered decliners by about 5-to-1 on the New York Stock Exchange, where consolidated volume was 4.2 billion shares.