NEW YORK (AP) - Wall Street - at least for the moment - shrugged off some of its many concerns yesterday and bounded higher thanks to a drop in oil prices. The Dow Jones industrial average rose 276 points, or 2.5 percent, posting its best daily gain since April.

The broader Standard & Poor's 500 index also gained 2.5 percent, while the technology-dominated Nasdaq composite index surged 3.1 percent. Investors exited government bonds and back into stocks as it appeared that the slowing economy will curtail demand for fuel and, in turn, energy costs.

Light, sweet crude fell $4.14 to settle at $134.60 a barrel on the New York Mercantile Exchange, compounding a drop of $6.44 on Tuesday.

In addition to sinking oil prices, investors found relief in a decision by Wells Fargo & Co. to boost its dividend that helped counter some of the market's concerns about the health of banks.

The San Francisco-based bank's move to raise its payout, along with its tamer-than-expected profit decline, was seen as a bullish sign for the troubled sector.

Still, the Labour Department's report that consumer prices shot up in June at the second fastest pace in 26 years reminded investors that inflation still poses a threat to economic growth.

And Wall Street remains uncertain about the economy and specifically the financial sector. This week has brought fresh attention to potential trouble spots in the mortgage market. Fannie Mae and Freddie Mac, the government-chartered mortgage financiers, are still a concern, as are regional banks that could have bad mortgage debt on their books.

But, for the moment, investors were pleased by the drop in oil from record levels.

"I think the pullback in oil is significant. The market and the market participants clearly had digested what the impact was going to be if oil prices had stayed at that level," said Dan Genter, president and chief investment officer of RNC Genter in Los Angeles.

According to preliminary calculations, the Dow rose 276.74, or 2.52 percent, to 11,239.28. It was the blue-chips' biggest one-day gain since April 1, when the index rose 391 points.

On Tuesday, stocks ended mostly lower on continuing worries about the financial sector; the Dow logged its first close below 11,000 since July 2006.

Broader stock indicators also rose yesterday after fluctuating in the early going. The S&P 500 index advanced 30.45, or 2.51 percent, to 1,245.36, and the Nasdaq rose 69.14, or 3.12 percent, to 2,284.85.

Advancing issues narrowly outpaced decliners by more than three-to-one on the New York Stock Exchange, where volume came to 1.73 billion shares.

While yesterday's advance likely indicates some enthusiasm among investors, it could also reflect simple bargain hunting rather than a great change in conviction. With many quarterly reports due in the coming weeks, many investors remain uncertain about the health of the economy.

Bond prices declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 3.94 percent from 3.82 percent late on Tuesday.

The dollar was mixed against other major currencies, while gold prices fell.

Oil prices declined after Energy Department figures showed that domestic inventories of crude oil and gasoline rose last week, rather than declining as analysts had expected.

"I think what you're seeing is people are feeling more confident that civilization as we know it is not going to cease to exist and that we're going to make a landing here," Mr. Genter said of the decline in oil. "The negative is there is not much of a catalyst here to really pick us up and get us back in the air."

The Labour Department's report that its Consumer Price Index rose 1.1 percent in June came after economists had expected a gain of 0.8 percent.

Two-thirds of the increase is linked to surging energy prices. The core reading, which excludes often volatile food and energy costs, ticked up 0.3 percent.

Wall Street has been concerned in recent months that rising prices for necessities like food and fuel would force investors to curb their spending in other areas. A pullback is a disturbing prospect for investors as consumer spending accounts for more than two-thirds of US economic activity.

In addition, rising prices could lead the Federal Reserve to raise interest rates, a move that risks derailing economic growth by making access to capital more expensive.

Beyond the inflation reading, which follows a report on Tuesday that showed a 1.8 percent increase in wholesale prices for June, investors examined a Fed report that industrial production rose 0.5 percent in June after declining 0.2 percent in May.