The S&P 500 rose on Wednesday to twice its value from just two years ago, a bounce whose vigor has not been seen since the Great Depression.
Stocks were boosted by Dell earnings and deal announcements fueling hope for more gains, but light volume makes the recent move more tenuous.
The market overcame concerns about tensions between Israel and Iran, and indexes slowly climbed back to close near the session's high.
It seems that there's just a lot of pent-up demand, and the market is very quick to shrug off news that could appear negative, said Angel Mata, managing director of listed equity trading at Stifel Nicolaus in Baltimore.
Still, volume struggled to match the year's average of 7.9 billion shares on the New York Stock Exchange, NYSE Amex and Nasdaq. About 7.5 billion shares changed hands on Wednesday.
The S&P 500 closed above 1,333.58, double the intraday low hit in early March 2009. On a closing level, the market has risen more than 96 percent since March 9, 2009 --a run not seen in such a short period of time since 1936, according to Howard Silverblatt, senior index analyst at Standard & Poor's.
The steep advance on relative low volume has sparked many forecasts for a correction.
You have still a healthy degree of skeptics out there, Mata said. You never want the market to be too bullish.
Two Iranian warships planned to sail through the Suez canal en route to Syria on Wednesday, an Israeli official said, calling it a provocation by the Islamic Republic.
The pullback following the comments was another opportunity for money on the sidelines to get back into stocks, Mata said.
The Dow Jones industrial average <.DJI> gained 61.53 points, or 0.50 percent, to 12,288.17. The Standard & Poor's 500 Index <.SPX> rose 8.31 points, or 0.63 percent, to 1,336.32. The Nasdaq Composite Index <.IXIC> added 21.21 points, or 0.76 percent, to 2,825.56.
Advancing stocks outnumbered declines on the NYSE by a ratio of 3 to 1. On the Nasdaq, more than nine stocks rose for every five that fell.
Crude and basic materials shares again gave the market direction, with the energy sector of the S&P 500 <.GSPE> up 1.3 percent and materials <.GSPM> up 1.2 percent.
Oil services provider Halliburton Co
Further boosting energy shares, Brent crude settled up more than 2 percent near $104 a barrel on concerns over the Israel-Iran tension.
French drugmaker Sanofi-Aventis SA
In another proposed deal, activist investor Nelson Peltz's Trian Group offered to acquire Family Dollar Stores Inc
Trian's bid for Family Dollar helped shares of other discount retailers. Dollar Tree Inc
In economic news, U.S. core wholesale prices rose in January at the fastest rate in more than two years, raising some concerns about inflation. But economists brushed off inflation concerns and said the recovery was too weak for a big spike in consumer prices.
(Reporting by Rodrigo Campos; Editing by Dan Grebler)