At times the blue-chip index was flirting with its all-time record for a one-day climb of 188 points that was set two days after the "Black Monday" crash of 1987.
The Dow is now within striking distance of its previous all-time high of 7,084 set in early March.
Bonds also surged with the price of the 30-year Treasury sharply up and its yield ending below the psychologically important 7 per cent mark at 6.98 per cent.
Behind the euphoria was news that the latest Employment Cost Index, which tracks all employment costs including wages and social benefits, was up by a modest 0.6 per cent in the first quarter. Wall Street had been braced for an increase of 0.9 per cent.
"This is a very friendly number," remarked Larry Wachtel of Prudential Securities. "Cause and effect says this is a benign number and bonds are rallying. Bonds are the gatekeeper of stocks."
Two other economic reports bolstered the market's enthusiasm. The government reported a 3.0 per cent drop in durable goods orders during March, the largest drop since August last year while the Conference Board said separately that consumer confidence had dropped for the second straight month in April.
Combined, yesterday's figures spurred speculation that the Federal Reserve may hold back from raising rates at its next policy-setting session on 20 May if it judges that the economy is already slowing down and that inflation, including wage inflation, remains at bay.
At its last meeting a month ago, the Federal Reserve increased short- term rates by one quarter of a point.
"The Fed should target inflation and there is no evidence of it returning," said US Representative Jim Paxton who is chairman of the Joint Economics Committee.
"Therefore there is no justification for further lifting rates as there was no justification for raising them a month ago."
Share prices in London also soared. At the close, the FTSE 100 share index sported a 43.5 point advance to 4,433.2.Reuse content