NEW YORK — Bank stocks turbocharged 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 218 points and closed at its highest level since the last day of 2007.
The Nasdaq composite closed above 3,000 for the first time since December 2000, when dot-com stocks were collapsing.
There was already plenty of good news driving the market higher Tuesday: Retail sales in February increased the most since September, and the Federal Reserve said it expected the unemployment rate to keep falling.
Then the market soared in the final hour after JPMorgan Chase, the country’s largest bank by assets, announced that it plans to buy back as much as $15 billion of its stock and raise its quarterly dividend by a nickel to 30 cents per share.
“That’s what really made the day,” said Jeffrey Kleintop, chief market strategist at LPL Financial.
JPMorgan Chase stock soared 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.
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 record, 14,164.53, set less than three months earlier. All 30 stocks in the Dow closed higher, the first time that has happened this year.
The Nasdaq composite index rose 56.22 points, or 1.9 percent, to 3,039.88.
On Dec. 11, 2000, the last time the Nasdaq closed above 3,000, it was in the middle of a horrifying slide – from a peak above 5,000 in March 2000 to just above 1,100 in October 2002.
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.
“The Nasdaq hasn’t done much of anything for 12 years, but it’s had a huge rally in earnings,” Ablin said.
Today, the profits are real. Apple reported $46 billion in revenue in its latest quarter. The Nasdaq composite, which includes more than 2,500 companies, trades at about 24 times earnings, according to Birinyi Associates.
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. The S&P is a 12 percent rally from its record of 1,565.15.
Brian Gendreau, market strategist at Cetera Financial, said stocks could still go higher. Investors are paying roughly 14 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.
The retail sales report showed a gain of 1.1 percent last month. Some of it reflected higher gas prices, but Americans also spent more on cars, clothes and appliances. Department stores had their biggest gains in more than a year. The government also revised its estimates higher for December and January. Retail stores reported a 6.7 percent increase in sales in February compared with the same month a year ago.
A reading of confidence among small business owners also rose in February for the sixth month in a row. The National Federation of Independent Business optimism index reached its highest level in a year, helped by an increase in expected sales.