updated 2/2/2007 8:37:27 AM ET 2007-02-02T13:37:27

Stocks climbed higher for the second straight day Thursday as an already buoyant Wall Street embraced robust consumer spending figures and largely overcame disappointment in Google Inc.’s profit report. Both the Dow Jones industrials and the Russell 2000 index of smaller companies closed at new highs.

Major Market Indices

The gains followed Wall Street’s best day of the year on Wednesday, when it advanced sharply after the Federal Reserve signaled that the economy remained solid and that inflation was mostly in check. The central bank’s comments, which followed its decision to leave short-term interest rates unchanged, injected a bit of confidence into an uncertain market. The first month of the year had revealed investor uneasiness about whether stocks were poised to climb higher from sharp gains seen in 2006 or whether the Fed and a drop corporate profits would bring an unceremonious end to the party.

Economic data continued to play a big role in trading, as it has all week. As expected, consumer spending in December showed its biggest increase in five months, rising 0.7 percent.

“It seems to me the Fed is on hold for the foreseeable future and stocks are taking solace in that,” said Brian Levitt, corporate economist for OppenheimerFunds Inc. While he expects the Fed is most likely to leave rates unchanged in 2007, he said that if it did make a move the central bank would be more likely to raise rates than lower them.

According to preliminary calculations, the Dow Jones industrial average advanced 51.99, or 0.41 percent, to 12,673.68. The session saw the blue chip average’s 27th record close since the start of October, coming in well above the record of 12,621.77 set little more than a week ago, on Jan. 24. A new trading high of 12,682.57 topped a day-old record of 12,657.02.

Broader stock indicators also showed strong gains. The Standard & Poor’s 500 index rose 7.70, or 0.54 percent, to 1,445.94, and the Nasdaq composite index was up 4.45, or 0.18 percent, at 2,468.38.

The Russell 2000 rose 7.43, or 0.93 percent, to 807.77. The index first broke the 800 mark on Wednesday.

Bond prices fell following the economic figures, with the yield on the benchmark 10-year Treasury note rising to 4.83 percent from 4.82 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

Light sweet crude settled down 84 cents at $57.30 per barrel on the New York Mercantile Exchange.

In other economic news, the Labor Department reported the number of newly laid off workers seeking unemployment benefits fell by 20,000 last week to 307,000. The figure pushed the four-week average for claims to the lowest level in a year. The reading also bolstered investor confidence for the department’s January unemployment report, which is due Friday.

Levitt noted low unemployment coupled with forces such as unseasonably warm weather have given a boost to the economy.

“These are things that promote the consumer to go out and spend. I think the key is employment. You have a U.S. consumer that has a job and is making money,” he said, adding that low unemployment is central to a continuation of robust consumer spending and therefore further advances on Wall Street.

As consumer spending accounts for more than two-thirds of economic activity, Wall Street attempted to look past the Institute for Supply Management’s January reading on the manufacturing sector. The index fell to 49.3 from 51.4 in December, a weaker-than-expected reading. The manufacturing sector has been giving off more signs of weakness than the service sector. Also, pending home sales for December were higher, suggesting a stabilizing in the home sector, according to the National Association of Realtors.

Google Inc. posted a sharp increase in profits, though investors used to outsize gains weren’t wowed. The stock was off $19.75, or 3.9 percent, at $481.75.

Exxon Mobil Corp. turned in a profit of $39.5 billion for 2006, the largest ever for a U.S. company, even as fourth-quarter profits slipped 4 percent. Likewise, revenue rose to $377.64 billion for the year, surpassing the record $370.68 billion the company reported in 2005. Exxon rose 98 cents to $75.08.

Archer Daniels Midland Co. rose $3.47, or 10.8 percent, to $35.47 after earnings at the largest U.S. food processor increased 20 percent amid a jump in profits from processing corn.

ON Semiconductor Corp. jumped $1.36, or 16.3 percent, to $9.72 after the company posted a hefty increase in fourth-quarter profits.

Comcast Corp. fell $1.43, or 3.2 percent, to $42.92 after the nation’s largest cable television operator’s fourth-quarter profit came up short of Wall Street’s forecast. Profits nearly tripled as revenue rose 30 percent.

Boeing Co.’s shares reached a record high of $92.24 before finishing up $1.49 at $91.05; the aerospace company reported strong results on Wednesday.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 1.69 billion shares.

Overseas, Japan’s Nikkei stock average closed up 0.78 percent. Britain’s FTSE 100 finished up 1.28 percent, Germany’s DAX index closed up 0.92 percent, and France’s CAC-40 rose 0.96 percent.

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