By JONATHAN CHENG

U.S. stocks soared to a fresh five-year high, putting the Dow Jones Industrial Average on the cusp of record highs, as a strong Italian bond auction and central bank reassurances eased investor worries over Europe's debt crisis .

The blue-chip Dow industrials jumped 175.24 points, or 1.26%, to 14075.37, the highest level since Oct. 12, 2007. With the day's advance, the Dow's best since the first day of the year, the blue-chip measure is now less than 100 points from its record high.

The broad-based Standard & Poor's 500-stock index soared 19.05 points, or 1.27%, to 1515.99, and the Nasdaq Composite climbed 32.61 points, or 1.04%, to 3162.26.

The gains were broad-based, with all but one of the 30 Dow components and all 10 sectors of the S&P 500 in positive territory. About 95% of the S&P 500 components advanced.

The advance, which saw the market tick steadily higher throughout the day, comes halfway through a week of unusual volatility in the markets. On Monday, the Dow suffered its biggest one-day drop this year, after an uncertain Italian election outcome unsettled investors concerned about Europe's ongoing debt crisis.

In addition, investors were growing worried about a bundle of preprogrammed government spending cuts that could arrive as early as next month, and about the Federal Reserve's determination to support the economy through bond purchases.

On Tuesday, however, the Dow rebounded 116 points as Fed Chairman Ben Bernanke headed to Capitol Hill to reiterate his commitment to a loose monetary policy.

That rallied carried over into Wednesday, which marked the fourth consecutive triple-digit move for the Dow in either direction -- the first time since November 2011 that investors have seen this level of volatility.

Trading volumes, however, weren't particularly strong, with just 3.5 billion shares changing hands in New York Stock Exchange composite volume, roughly in line with this year's daily average of 3.6 billion shares.

A number of factors drove stock prices higher. In addition to Mr. Bernanke's testimony, Mario Draghi, president of the European Central Bank, pledged in prepared remarks Wednesday that his bank would preserve the integrity of the currency area, and signaled that the ECB would stick to its accommodative monetary policy.

"Don't fight the central banks globally--the Fed is going to keep the punch bowl full for some time," said Matt Lloyd, chief investment strategist at Advisors Asset Management in Monument, Colo.

Mr. Lloyd added that he wasn't concerned about the latest developments in Europe, arguing that the key event of the year would be autumn elections in Germany. "What's going on in the German elections is more important, and what I see there is more stability," Mr. Lloyd said. "Yes, there are problems and big inefficiencies in Italy, but a lot of the worst possible scenarios have taken place already, and what we're seeing is the hangover."

Investors entered the year on a strong footing, enjoying the best January in nearly two decades. That left many investors sitting on the sideline, awaiting an opportunity to join the rally. Monday's selloff may have given them that opportunity, investors said.

"The fear that might have existed two or three days ago, that [the Italian election] might be the tipping point, looks like that may have been the opportunity for many money managers to put money to work," said Michael Strauss, chief investment strategist at Commonfund, in Wilton, Conn. "Our markets shouldn't be determined necessarily by the political process in Italy...This was really more of a European event than a U.S. event."

Added Phil Orlando, who helps manage $370 billion as chief market strategist at Federated Investors: "Investors were not waiting for much of a pullback before putting money into the market,"

Industrial and materials stocks led the day's gains. Among industrial companies, Caterpillar tacked on 2.6% and Boeing climbed 2.3%, helped in part by earnings from Joy Global, which soared 5.8% after the heavy-duty mining-equipment maker reported better-than-expected quarterly revenues.

Financial stocks, which had taken a beating in recent days amid concerns about Europe's debt crisis, also fueled the rally after Italy's government-bond auction garnered solid demand. J.P. Morgan Chase led the Dow industrials, gaining 3.5%, while Bank of America rose 1.6%. Goldman Sachs Group and Morgan Stanley also moved higher, gaining 2.5% and 2.1% respectively.

The market managed to gain even without the help of Apple, one of the largest stocks on the S&P 500 and the Nasdaq Composite. The blue-chip technology company lost 1% after CEO Tim Cook avoided directly engaging investors in a discussion of what to do with its massive cash hoard of $137 billion.

The U.S. gains were foreshadowed by a robust rebound in European markets. The Stoxx Europe 600 advanced 0.9% after shedding 1.3% a day earlier.

Italy sold 6.5 billion euros ($8.49 billion), the maximum targeted amount, of government bonds, although funding costs were the highest since auctions in October. Italy's FTSE MIB index gained 1.8% after tumbling 4.9% on Tuesday.

In U.S. economic headlines, durable-goods orders dropped 5.2% in January, less than expected. Many economists said the report showed resilience in light of uncertainty over preprogrammed government spending cuts that many feared would take place at the end of December.

Separately, pending home sales rose a stronger-than-expected 4.5% in January from December to the highest level since April 2010.

In Asia, Japan's Nikkei Stock Average bucked the general trend, losing 1.3% as a stronger yen weighed on exporter shares.

Crude-oil prices rose 0.1% to $92.76 a barrel, while gold fell 1.2% to $1,595.20 a troy ounce. The dollar fell against the yen and the euro. Demand for Treasurys fell, sending the yield on the 10-year note up to 1.903%.

In corporate news, Dollar Tree led the S&P 500 components, rising 10% after the discount retailer reported better- than-expected quarterly earnings and revenue. Rivals Dollar General and Family Dollar Stores rose 3.6% and 2.5%, respectively.

Target, however, fell 1.5% after the retailer reported higher expenses, overshadowing quarterly earnings that showed better-than-expected revenue.

Priceline.com climbed 2.6% after the online-travel agent reported higher-than-expected earnings amid strength in its international bookings, rental-car and hotel-bookings businesses.

Casino operators rose after New Jersey Gov. Chris Christie signed a law Tuesday that allows Atlantic City casinos to run gambling websites. Boyd Gaming, Wynn Resorts and Las Vegas Sands each advanced 1.3% or more.

First Solar's 14% slump made it the biggest decliner in the S&P 500, after the solar-panel maker's quarterly revenue fell well short of forecasts and the company offered a downbeat quarterly outlook.

Accretive Health tumbled 21% after the provider of revenue-cycle management services to health-care providers said late Tuesday it would postpone the release of fourth-quarter results and withdrew its financial outlook while it evaluates the timing of revenue recognition for some management agreements.

DreamWorks Animation SKG declined 1.8% after the computer-animation studio's profits were hurt in part by a write-down of the cost of the movie "Rise of the Guardians."

Write to Jonathan Cheng at jonathan.cheng@wsj.com

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  02-27-130715ET
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