NEW YORK (AP) — The Dow Jones industrials set new highs Wednesday when stocks extended their gains for a second day after Federal Reserve Chairman Ben Bernanke told a Senate panel the economy should grow modestly this year and that he expects inflation will continue to ease.The combined gains Tuesday and Wednesday were the Dow’s biggest since August 15-16.

Wall Street, which had faced some concern about whether Bernanke might sound a hawkish note on inflation, welcomed his benign remarks.

While investors might debate whether the Fed will lower short-term interest rates later this year, Wall Street appeared more confident the central bank was at least likely to leave rates unchanged, as it has in recent meetings.

Investors pleased by a sense that the overall economy is doing well managed to look past a Commerce Department report that retail sales were essentially flat in January amid slumping automobile sales. It was the weakest showing in three months and below what Wall Street had forecast. News that DaimlerChrysler AG plans to chop 13,000 Chrysler workers under a plan to restore the US operations’ profitability by next year pleased investors. But Coca-Cola’s earnings disappointed Wall Street.

“I think what we’re having is a victory lap. So far the Fed’s forecasts have been almost been spot on,” said Drew Matus, senior economist at Lehman Brothers. “So what this tells us is that the Fed is most likely not in any hurry to move rates in either direction.”

The Dow Jones industrial average rose 87.01, or 0.69 percent, to 12,741.86. The Dow set an intra-day high of 12,759.40, eclipsing a high of 12,700.28 set February 7. The blue chip average also finished at a new high, its 28th record close since the start of October.

The previous record, set February 1, was 12,673.68.

Wednesday marked the first time since March 1998, the Dow industrials, transportation and utilities averages have closed at simultaneous highs. Such an alignment has now occurred only 20 times since 1929. The New York Stock Exchange Composite index closed at a record high 9,427.31.

Other stock indicators also climbed. The Standard & Poor’s 500 index rose 11.04, or 0.76 percent, to 1,455.30. The large-cap index is trading at its highest level in more than six years.

The Nasdaq composite index gained 28.50, or 1.16 percent, rising to 2,488.38.

Bonds rose sharply following Bernanke’s testimony, with the yield on the benchmark 10-year Treasury note falling to 4.74 percent from 4.81 percent late Tuesday.

The dollar was lower versus most major currencies, except the yen. Gold prices rose.

Light, sweet crude settled down $1.06 at $58 per barrel on the New York Mercantile Exchange after weekly domestic inventory data showed stores of distillates such as home heating oil fell by less than analysts had been expecting.

A brush of cold weather across much of the nation had led forecasters to expect a larger decline.

But much of investors’ attention remained on Bernanke’s testimony. He didn’t rule out the possibility of rate hikes, saying interest rates remain “somewhat elevated.”

Investors were receptive to his assessment a precipitous slowdown in the housing sector was showing signs of easing.

Matus said the Fed appears mostly happy with where the economy stands and that a rate hike would likely come only after the economy gave off strong inflationary signals.

“Given what we heard from him there would need to be some pretty good evidence that inflation was moving in the wrong direction,” Matus said. “There’s no sense in rocking the boat if the boat is going in the right direction.”

The Fed left short-term interest rates, the rate banks charge each other for overnight loans, at 5.25 percent in late January.

It was the fifth straight time the Fed had stood pat on interest rates and followed a string of 17 consecutive increases that began in 2004.

The flurry of news Wednesday follows a day in which stocks showed sharp gains — the Dow Jones industrial average added 102 points — after news that two companies were vying for aluminium producer Alcoa helped drive a notion that Wall Street would see an uptick in acquisition activity. Alcoa fell 43 cents to $34.57.

In corporate news Wednesday, Coca-Cola’s fourth-quarter profit fell 22 percent despite higher sales.