US STOCKS-S&P, Dow end at two-year high on Fed, retail sales

                                
  
                                
 * S&P, Dow hit two-year closing high on Fed stimulus plan
                                
 * Commodity, material stocks among day's biggest gainers
                                
 * Retail stocks rally after October sales rise 1.6 pct
                                
 * Indexes up: Dow 2 pct, S&P 1.9 pct, Nasdaq 1.5 pct
                                
 * For up-to-the-minute market news see [STXNEWS/US]
                                
 (Updates to close)
                                
 By Ryan Vlastelica
                                
 NEW YORK, Nov 4 (Reuters) - U.S. stocks extended a rally
that started in September to close at two-year highs on
Thursday, a day after the Federal Reserve unveiled a plan to
boost the economy.
                                
 A bullish read on consumers also boosted shares as many
retailers posted stronger-than-expected sales for October. The
S&P retail index <.RLX> gained 1.7 percent and apparel maker
Gap Inc <GPS.N> added 6.1 percent to $20.43.
                                
 Confounding expectations of a sell-off after the Fed's
asset-buying plan, investors instead focused on the flood of
cheap money expected to flow into the banking sector from the
U.S. central bank's plan to buy more Treasury debt.
                                
 "The Fed news is really driving up commodity-related
companies and spreading to other areas of the economy," said
Peter Tuz, president of Chase Investment Counsel in
Charlottesville, Virginia. "It's really a perfect storm of good
news."
                                
 The S&P 500 index is up about 16 percent since the start of
September as investors bet that Fed action and Republican gains
in the U.S. midterm election would create a better environment
for corporate profits. The Dow index closed at its highest
since the collapse of Lehman Brothers in September 2008.
                                
 The CBOE Volatility Index <.VIX>, Wall Street's so-called
fear gauge, fell 5.3 percent. The VIX usually moves inversely
with the S&P 500, tracking options prices that investors are
willing to pay as a protection on movement of the underlying
stocks. For a graphic see http://r.reuters.com/fuh83q.
                                
 The VIX's decline suggested investors were confident the
Fed's efforts will support market gains.
                                
 "Given the political changes, the monetary policy changes,
as well as good seasonal indicators, the market could trend
higher through December, said Eric Teal, chief investment
officer at First Citizens Bancshares in Raleigh, North
Caroline, which manages about $5 billion. "We could move up
another 5 percent even from these levels."
                                
 The Fed's plan to buy $600 billion in Treasuries lifted
riskier assets, as commodity-related stocks rose on
expectations of an increase in global demand.
                                
 An index of commodity prices <.CRB> rose 2.4 percent and
hit its highest level in more than two years while the U.S.
dollar fell.
                                
 Mining company Freeport McMoRan Copper and Gold Inc <FCX.N>
jumped 7 percent to $103.89, a price not seen since 2008. The
S&P materials index <.GSPM> was up 3.3 percent, and Dow
component Exxon Mobil Corp <XOM.N> added 2.1 percent to $69.38.
                                
 Almost all sectors benefited in the rally, with five stocks
rising for every one that fell on the New York Stock Exchange
and more than three rising for every one that fell on the
Nasdaq.
                                
 The Dow Jones industrial average <.DJI> closed up 219.71
points, or 1.96 percent, at 11,434.84. The Standard & Poor's
500 Index <.SPX> was up 23.09 points, or 1.93 percent, at
1,221.05. The Nasdaq Composite Index <.IXIC> was up 37.07
points, or 1.46 percent, at 2,577.34.
                                
 Retail stocks surged after October's same-store sales data,
which appeared to bode well for the upcoming holiday shopping
season. Target Corp <TGT.N> rose 1.5 percent to $54.76 while
Macy's Inc <M.N> advanced 6.6 percent to $25.56.
[ID:nN04122512]
                                
 In what could be seen as conflicting technical signals, the
S&P 500 daily moving average convergence-divergence chart
triggered a buy signal for the first time since Oct. 18, but
its relative strength index, or RSI, jumped near 76. An RSI
reading above 70 indicates an overbought level.
                                
 While the VIX was lower, options implied volatility on
exchange-traded funds that track the S&P and Nasdaq instantly
dropped near last month's lows following the Fed announcement,
according to a Jefferies Equity Derivatives note. Implied
volatility on November expiring options fell 2.7 percent while
December expiration options fell 1.8 percent.
                                
 Investors shrugged off data that showed a weekly rise in
new claims for unemployment benefits. Other data showed unit
labor costs fell in the third quarter and nonfarm productivity
rebounded at a much stronger-than-expected 1.9 percent annual
rate in the third quarter. [ID:nN04207851]
                                
(Editing by Padraic Cassidy)