updated 7/15/2005 8:51:12 AM ET 2005-07-15T12:51:12

A trifecta of good news — positive economic data, strong earnings and a sharp drop in oil prices — sent stocks sharply higher Thursday, and lifted the benchmark Standard & Poor’s 500-stock index to a fresh four-year high. The rally also drove the Nasdaq composite index into positive territory for 2005.

Major Market Indices

Wall Street was encouraged by the latest reading of the Labor Department’s Consumer Price Index , which measures how much consumers pay at the retail level. The CPI was unexpectedly flat for June, while “core” CPI — with food and fuel costs removed — edged just 0.1 percent higher.

Record earnings from Apple Computer Inc. also cheered investors, while a sharp 1.7 percent jump in retail sales for June assuaged fears that high oil prices would crimp consumer spending.

“I was very pleasantly surprised by the releases today, with low inflation and very strong retail sales growth. And in general, second-quarter earnings are off to a very strong start,” said Lincoln Anderson, chief investment officer at LPL Financial Services. “This is just unalloyed good news, and no dark spots in there that I can see.”

The broad Standard & Poor’s 500-stock index finished the day up 3.21 points, or 0.3 percent, closing just above a four-year high of 1,225.31 reached on March 7.

Other stock indexes rallied. The Nasdaq composite index climbed 8.71 points, or 0.4 percent, to its best close since Dec. 31, while the Dow Jones industrial average rallied 71.50 points, or 0.7 percent, to its highest level since March 16.

Despite the advance, the major indexes pulled back from their session highs as investors collected profits from the past week’s run-up in stock prices. The indexes have risen between 3 percent and 4 percent over the last six trading days.

“We’re holding on, for the most part, but I think there’s been some profit-taking that’s kept us from going much higher,” said Brian Williamson, an equity trader at The Boston Company Asset Management. “There’s a lot of excitement about what’s been happening with earnings and the economic data and oil, but we’re still hitting a little resistance.”

Crude oil futures dropped sharply Thursday after the International Energy Agency predicted global demand would ease.

Retail stocks pushed higher on a positive Commerce Department sales report . Lowe’s Companies Inc. hit an all-time high earlier in the session and was up 70 cents at $62.90. Target Corp., which also reached a historic high, gained 52 cents to $58.39, and Best Buy Inc. added 60 cents to $75 after surpassing its all-time high in morning trading.

Apple’s earnings boosted the overall tech sector as the computer and electronics maker credited ongoing demand for the iPod music player for its record profits. While Apple took the unusual step of warning that its third-quarter profits would fall below expectations, investors weren’t dissuaded. Apple stock surged $2.40, to $40.75.

Advanced Micro Devices Inc. rose 63 cents to $19.88 after the chip maker reported a 65 percent drop in profits , yet still beat Wall Street profit forecasts by 8 cents per share. While analysts expected the company to post a loss for the quarter, record microprocessor sales helped the company overcome a sharp drop in demand for flash memory chips.

In a rare bit of good news for the airline sector, Southwest Airlines Inc. saw a 41 percent surge in profits for the second quarter. The company credited fare increases and rising passenger traffic for helping overcome rising fuel prices. Southwest climbed 44 cents to $14.42 and lifted other airline stocks as well. AMR Corp., parent of American Airlines, gained $1.08 to $13.87, while Delta Air Lines Inc. rose 61 cents to $4.05.

The struggling automotive sector also got a boost, with General Motors Corp. jumping $1.13 to $37 after analysts at Lehman Brothers upped the stock to “equal weight” from “underweight.” Ford Motor Co. added 20 cents to $10.89 as well. Both stocks also benefited from strong auto sales reported in June.

Yum Brands Inc., parent of the Taco Bell and KFC fast food chains, dropped $1.86 to $49.85 despite reporting a rise in second-quarter profits that beat Wall Street expectations by 5 cents per share. The company warned that its future earnings would fall below analysts’ projections.

Overseas, Japan’s Nikkei average rose 0.9 percent. In Europe, Britain’s FTSE 100 was up 0.3 percent, France’s CAC-40 index gained 0.6 percent and Germany’s DAX index climbed 0.4 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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