Stocks rose for a third day as optimism over a recovering U.S. economy overrode concern that coronavirus cases are worsening in locations ranging from Texas to China. Treasury yields rose and the dollar strengthened.

The S&P 500 climbed 1.9 per cent, with energy, health care and materials leading all 11 industry sectors higher in the biggest gain in more than a week. The benchmark index initially surged after data showed U.S. retail sales jumped by the most on record. Federal Reserve Chairman Jerome Powell said the U.S. economy may be bottoming out during his semi-annual policy report to Congress.

Unofficially, the Dow Jones Industrial Average rose 543.68 points, or 2.11 per cent, to 26,306.84, the S&P 500 gained 60 points, or 1.96 per cent, to 3,126.59 and the Nasdaq Composite added 173.38 points, or 1.78 per cent, to 9,899.40.

“Right now there’s more cross currents than I can ever remember,” said John Porter, chief investment officer of equities at Mellon Investments. “The weight of where investors are focusing day-to-day really swings wildly from fears of the second wave, concerns about escalating tensions with China, complete vacuum of visibility on earnings.”

Stocks briefly pared gains after Florida reported that new cases rose to the highest level since the pandemic began and Texas saw hospitalizations surge. Elsewhere, Beijing shut its schools on concern about new infections.

“It shows you that the market is still extremely reactive in both directions to any virus-related news, especially on the upside when it’s good news,” aid Liz Ann Sonders, chief investment strategist at Charles Schwab & Co.

Government stimulus has been a key feature of the global equities rally, despite soaring unemployment and signs that a second wave of the virus has started to emerge. Now there are signals that more economic support is on the way.

The Trump administration is preparing a nearly US$1 trillion infrastructure proposal as part of its push to spur the world’s largest economy back to life, according to people familiar with the plan. On top of that, the Fed will start buying individual corporate bonds.

“The Fed is delivering on its promise to do whatever it takes,” said Todd Jablonski, chief investment officer at Principal Portfolio Strategies. “They can’t however offset the volatility that comes with risk assets as the number of cases picks up.”

Elsewhere, oil climbed above US$38 a barrel in New York amid signs of improving demand and declining production.

With files from Reuters