The Dow Jones industrial average rose 61 points on Thursday as traders reacted to news that retailers last month had their first sales gain in more than a year.  A closely watched gauge of sales at major retailers rose 0.1% in September. Still, most stores posted sales declines — though smaller than in recent months — even as their figures are compared with last September when business plummeted as the financial meltdown ballooned.  While still tepid, it was the first monthly rise in the International Council of Shopping Centers-Goldman Sachs tally since July 2008. 

On Thursday, the European Central Bank and Bank of England left interest rates unchanged.  Sentiment also received a boost from domestic corporate borrowing, which rose for the eight straight week. 

The growing optimism surrounding consumer spending, which is crucial for an economic recovery, followed late Wednesday’s good results from Alcoa.  The company surprised investors with its first profit in nine months, which the aluminum company attributed to cost-cutting and rising sales to automakers.  Analysts believe that it will take more than just cost cutting to impress investors this earnings season.  

Meanwhile, a better reading on the job market also fueled investors’ optimism.  The Labor Department reported that new claims for jobless benefits fell to 521,000 last week from 554,000 during the previous week.  Claims came to the lowest level since early January.

The Dow rose 61.29, or 0.6%, to 9,786.87. The index ended off its highest level after demand at a government auction of 30-year bonds fell short of expectations.  The Standard & Poor’s 500 index rose 7.90, or 0.8%, to 1,065.48, while the Nasdaq composite index rose 13.60, or 0.6%, to 2,123.93.  About three stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 5.2 billion shares, compared with 5.1 billion on Wednesday.  The market’s measure of investor worries, the CBOE Vix, dropped 2% to 24.18.

The Dollar Index, which tracks the US currency against a basket of currencies, dropped 0.7% to 75.968 after reaching 75.767, its weakest level since August 2008.  This morning, however, the dollar rebounded from its lows after Fed Chairman Bernanke seemed to signal a shortening of its accommodative policy timeline.  Economists currently do not expect policy shifts before mid-2010; however, Bernanke advised the Fed is ready to tighten monetary policy once the economy improves.  At the same time, he cautioned that “accommodative policy will likely be warranted for an extended period.”  Gold closed at a record $1,056.30 an ounce and hit an electronic trading high of $1,062.70 during the day.

A weak dollar, along with rising oil and gold prices, gave a boost to dollar-sensitive multi-nationals, such as Dow components 3M (MMM), GE (GE) and Johnson & Johnson (JNJ). The rise in oil prices lifted Chevron (CVX), Exxon Mobil (XOM) and other commodity names. 

The House is considering an extension of the first-time homebuyers’ tax credit, slated for November expiration. Pulte Homes (NYSE:PHM) shares climbed 4.3%; DR Horton (NYSE:DHI) increased 8.0%; and Lennar (NYSE:LEN) rose 9.1%.

Among retailers, Macy’s (NYSE:M) increased 5.1% after reporting a 2.3% sales drop, half the projected decline. Abercrombie & Fitch (NYSE:ANF) rose 5.2% after its sales decline proved less than feared.  Luxury retailer Saks (NYSE:SKS) fell 4.5% following its reported 11.6% decline in comparable sales.

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