Wall Street extends rally on Fed stimulus plan

NEW YORK (Reuters) - Commodity-related stocks led a rally in U.S. equities Friday, putting the S&P 500 on track for a fourth straight day of gains as investors cheered an aggressive plan by the Federal Reserve to stimulate the economy.

The Federal Reserve launched another stimulus program Thursday, its third quantitative easing measure, saying it would pump $40 billion into the U.S. economy each month until the jobs market showed sustained growth.

The Fed announcement lifted the benchmark S&P 500 index to its highest intraday level since January 2, 2008.

Big-cap giants Apple Inc and Exxon Mobil , the two largest companies in the U.S. by market value, continued to scale multi-year highs, and the small-cap Russell 2000 <.RUT> hit a record peak.

Retail sales rose 0.9 percent in August, advancing for a second straight month, boosted by automobiles and high gasoline prices, but the underlying tone pointed to modest economic growth in the third quarter.

"When you start to decompose the look of what happened in the retail number, people are going to start to back away a little bit; although the numbers weren't any surprise, they were pretty much on consensus," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago.

"It (also) adds a little bit of additional credibility and validity, if anybody needed it, for what (Fed Chairman Ben) Bernanke did yesterday."

Consumer prices rose 0.6 percent in August, the most in three years as the cost of gasoline jumped, but there was little sign of a pick-up in underlying inflation pressures.

The Dow Jones industrial average <.DJI> gained 73.50 points, or 0.54 percent, to 13,613.36. The Standard & Poor's 500 Index <.SPX> rose 9.31 points, or 0.64 percent, to 1,469.30. The Nasdaq Composite Index <.IXIC> climbed 29.42 points, or 0.93 percent, to 3,185.24.

S&P Dow Jones Indices said UnitedHealth Group Inc will replace Kraft Foods Inc in the Dow Jones Industrial Average after the close of trading Friday, September 21. Kraft is being removed as a result of its decision to spin off its North American grocery business. UnitedHealth shares rose 1.1 percent to $54.48 and Kraft slipped 0.3 percent to $40.03.

Industrial output fell 1.2 percent in August, the most in more than three years as production slowed in factories and a hurricane temporarily shut down oil and natural gas rigs in the Gulf of Mexico. Analysts polled by Reuters had expected industrial output to be flat last month.

The Fed announcement also pushed the dollar <.DXY> down 0.5 percent, boosting commodities by raising the allure of those priced in a weaker U.S. currency. Freeport-Mcmoran Copper & Gold Inc rose 3.7 percent to $42.32 and Alcoa Inc advanced 2.6 percent to $9.88. The PHLX gold/silver index climbed 3.2 percent to its highest since early March.

The Thomson Reuters/University of Michigan's preliminary September consumer sentiment index rose to 79.2, its highest level in four months, as Americans were more upbeat about their economic and job prospects.

Lastly, U.S. business inventories increased 0.8 percent in July, the largest gain in six months in July.

Staples Inc gained 4.5 percent to $12.50 after Fortune reported several private equity firms, including Bain Capital, were considering a buyout offer for the office retailer.

(Editing by Bernadette Baum)