Bullish sentiment took hold of markets as stocks charged higher--albeit on thin volume--with auto and homebuilding shares leading the way.
The Dow closed in record territory, above 12,500 for the first time, after the government reported new-home sales rose more than expected in November. The news fueled a rally in homebuilder stocks.
The Dow Jones Industrial Average closed up more than 16% year-to-date, the Nasdaq is up just over 10% for the year and the S&P 500 is higher by about 14%.
So far the Dow has posted the best quarterly gain in two years. Dow leaders included IBM ,Citigroup , ExxonMobil and Merck.
The New York Stock Exchange opened following a moment of silence in tribute to former President Gerald R. Ford, who died Tuesday night. The Nasdaq and the NYMEX observed a moment of silence at 11 am New York Time.
Shares of home builders all gained more than 1%, with the overall Dow Jones Home Construction index gaining 10 points, or 1.4%, to 729.58. The index has lost 21% this year, and is down about 35% from its high in July 2005.
"Next year, I do see the housing market as stabilized, but remember, we are stabilized at a lower level of activity," said David Lereah, Chief Economist for the National Association of Realtors, appearing on CNBC's "Power Lunch." "So, we are not going to attain the peak levels of activity of last year, but we will stabilize in 2007."
Weakness in crude oil prices continued due to concerns about warmer-than-normal weather. Weekly oil and gasoline inventory data will be released on Thursday, one day later than usual because of Monday's Christmas holiday.
Toyota and Ford Motor companies are in focus after executives from both automakers met last week in Japan. That meeting is sparking hopes of a potential alliance between the two companies, although Toyota is denying an alliance deal was discussed.
Shares of Dow component IBM were trading higher after ThinkEquity raised its rating to buy from sell and increased its price target to $110 from $70.
The Securities and Exchange Commission has started a formal investigation into the stock-option policies of UnitedHealth Group. The health insurer says it is delaying the release of its financial results until the probe is resolved.
Shares of Apple Computer were trading down on a report that federal prosecutors are investigating the possibility that stock option documents were falsified by company officials.
Boeing surpassed Airbus in aircraft orders for the year, selling 904 planes as of Dec. 20, compared to 714 sold by Airbus, the Financial Times Deutschland reported. The last time Boeing sold more planes was in 2000, Reuters said.
And newspaper publisher McClatchy said it will sell the Star Tribune of Minneapolis for $530 million to private equity group Avista Capital Partners.
Major Asian, European Markets Finish Higher
London's FTSE-100 , Frankfurt's DAX and the Paris CAC-40 all closed higher.
The FTSE CNBC Global 300 index was sharply higher.
In Asia, the Nikkei 225 Average finished up 0.31%, its highest level since May.