U.S. stocks closed higher on Tuesday, as Wall Street chalked up its strongest performance in 2014 after upbeat retail-sales data for December helped offset concerns that came with Friday's monthly jobs report.
"The biggest factor (driving the market) was the reassurance that people took from the retail numbers and the sales growth there. We're now shifting back to the basic idea that the jobs number was something of an aberration, so we can go back to the positive tilt we had," said Bruce McCain, chief investment strategist at Key Private Bank.
The Commerce Department report had retail sales rising 0.2 percent last month after a 0.4 percent advance the prior month.
The gauge of consumer spending was viewed as particularly important in light of Friday's dismal jobs report for December, which had the government reporting the addition of 74,000 to nonfarm payrolls, far below estimates of about 200,000. The Bureau of Labor Statistics also reported the unemployment rate fell to from 7 percent to 6.7 percent, with decline chalked up to the high number of those not actively looking for work.
But Randy Frederick, director of trading and derivatives at Charles Schwab, says the participation rate, while low, was the same as in October, when the unemployment rate stood at 7.2 percent. "The market seemed to take it as a very negative report, but the unemployment rate dropping should have been positive. It's not just a number and a rate, there's a lot more to it than that," he said.
JPMorgan Chase and Wells Fargo gained after reporting fourth-quarter results. Time Warner Cable rose after spurning a bid from Charter Communications. Google advanced after saying it would purchase digital-thermostat manufacturer Nest Labs for $3.2 billion. Tesla Motors surged after deliveries of its Model S sedan in the fourth quarter topped what the electric-car maker had forecast. Gamestop fell sharply after the video-game retailer projected fourth-quarter profit below expectations.
The Dow Jones Industrial Average advanced 115.92 points, or 0.7 percent, to 16,373.86, with Intel leading blue-chip gains that included 26 of its 30 components. JPMorgan Chase upgraded the chip maker to overweight from neutral, saying the PC market would stabilize this year. Boeing led Dow declines after battery problems resurfaced on one of its 787s parked in Tokyo.
The S&P 500 climbed 19.68 points, or 1.1 percent, with technology and energy the best performing of its 10 major sectors.
The Nasdaq gained 69.71 points, or 1.7 percent, to 4,183.01.
For every stock falling, more than two gained on the New York Stock Exchange, where nearly 650 million shares traded. Composite volume topped 3.3 billion.
The dollar fluctuated against the currencies of major U.S. trading partners, while the yield on the 10-year Treasury note climbed 5 basis points to 2.876 percent.
Wells Fargo, the nation's biggest mortgage lender, reported an 11 percent rise in fourth-quarter profit as bad-loan provisions fell sharply.
JPMorgan Chase reported a 7.3 percent decline in quarterly profit after the largest U.S. bank by assets paid penalties for not reporting suspicions of fraud by Bernie Madoff.
Tuesday's economic data included The National Retail Federation reporting holiday sales climbed 3.8 percent to $601.8 billion in November and December, with the number coming in just shy of the group's forecast.
Another economic report had U.S. import prices coming in flat in December, versus expectations calling for a 0.3 percent increase.
The Commerce Department said Tuesday that business inventories rose 0.4 percent in November, suggesting restocking would be a boost to fourth-quarter economic growth.
And, The National Federation of Independent Business on Tuesday said its Small Business Optimism Index edged up 1.4 point to 93.9 in December, with companies more optimistic about future business conditions and earnings.
On Monday, stocks fell sharply as investors braced for quarterly earnings and after Fed Bank of Atlanta President Dennis Lockhart said tepid payrolls growth in December should not dissuade central bank officials from reducing monthly asset purchases.
On Tuesday, Philadelphia Fed President Charles Plosser said Fed stimulus should end later in the year with the economy in better shape than it's been the last few years, and Dallas Fed President Richard Fisher advocated the Fed trim its bond buying as rapidly as possibly.
—By CNBC's Kate Gibson
Coming Up This Week:
Wednesday: Producer Price Index at 8:30 a.m. Eastern. Empire State survey at 8:30 a.m. Eastern. Beige Book at 2 p.m. Eastern. Atlanta Fed's Dennis Lockhart on the economy and policy at 5:45 p.m. Eastern. Earnings from Bank of America, Fastenal, CSX, Kinder Morgan, Clarcor and Plexus.
Thursday: Initial jobless claims at 8:30 a.m. Eastern. Consumer price index at 8:30 a.m. Eastern. Treasury international capital flows data at 9 a.m. Eastern. San Francisco Fed President John Williams on zero rate policy at 9:15 a.m. Eastern. Philadelphia Fed survey at 10 a.m. Eastern. NAHB survey at 10 a.m. Eastern. Fed Chairman Ben Bernanke at Brooklings Institution's Conference on Central Banking after the Great Recession at 11:10 a.m. Eastern. Earnings from BlackRock, Citigroup, Goldman Sachs, Taiwan Semiconductors, UnitedHealth, BB&T, Charles Schwab, First Republic Bank, American Express, Intel, PNC Financial, Capital One, Sallie Mae, People's United Skyworks Solutions.
Friday: Housing starts at 8:30 a.m. Eastern. Industrial production at 9:15 a.m. Eastern, Consumer sentiment at 9:55 a.m. Eastern, JOLTS at 10 a.m. Eastern. Richmond Fed President Jeffrey Lacker at 12:30 p.m. Eastern. Earnings from General Electric, Morgan Stanley, Schlumberger, Bank of NY Mellon, Comerica, SunTrust, Wipro.
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