Better-than-expected earnings and the apparently insatiable appetite of private equity firms are driving stocks close to record highs. The good news, which includes robust retail sales and steady oil prices, is trumping concerns about inflation and the weak housing market.

The Dow Jones Industrial Average has risen 12 of the last 13 trading days—including more than 100 points on Monday—and is now within 100 points of its record close of Feb. 20.

The S&P 500 is at its highest level in more than six years and is close to eclipsing the record high it set on March 24, 2000, at the peak of the telecom and tech boom. The Nasdaq Composite Index is close to its highest level since the boom ended.

Citibank and Wachovia helped lift the market when they reported better-than-expected results.

Citi, the nation's largest financial institution, said its revenue increased 15 percent in the first quarter, for example. (Its profit declined 11 percent, but that was largely because of the cost of paring 17,000 jobs—a move that should boost profits down the road.)

Wachovia, meanwhile, said its profit rose 33 percent in the first quarter.

Merger news also encouraged investors. The $25 billion leveraged buyout of student loan company Sallie Mae and Google's $3.1 billion offer for internet ad broker DoubleClick boosted the stocks of all those companies—and others.

The Wall Street Journal said a steady stream of takeover offers reassures investors that stock markets still have plenty of buyers with cash. Bloomberg News said more than $680 billion of mergers involving U.S. companies have been announced so far this year, 46 percent more than at the same point a year ago.

Economic fundamentals are also fueling the rally. Retail sales increased 0.7 percent last month, the Commerce Department said. That was more than many economists had forecast, and was taken as a sign that consumers are still willing and able to spend. Some economists had worried that falling house prices might cause consumers to pull back from spending.

Adding to the euphoria were two sets of statistics this morning that indicate inflation is not accelerating, and housing starts increased last month.

Bloomberg said stocks are off to their best start in any April since 2003.