Christmas Eve brought glad tidings to Wall Street, with holiday cheer emanating from the battered financial sector and spreading through the market.
Major indexes closed near their highs for the day, as investors built on a rally last week that finally brought Santa Claus to the stock market.
The Dow Jones Industrial Average rose 98.68, or 0.73 percent, to 13,549.33. The Standard & Poor's 500 added 11.99, or 0.81 percent, to 1,496.45; and the Nasdaq composite rose 21.51, or 0.80 percent, to 2,713.50.
It was a light day of trading and for news on the markets. But in the main corporate deal of the day, Merrill Lynch said it plans to sell most of its Chicago-based capital lending business to General Electric's commercial finance arm. Merrill has suffered billions in writedowns due to subprime mortgage exposure.
Merrill also said it has raised $6.2 billion from Temasek Holdings in Singapore and Davis Advisors.
Though Merrill shares gave back gains from earlier in the trading day, financials were doing well overall, with gains posted early by Bear Stearns and Bank of America.
"The fact that large banks are taking the necessary steps to raise capital and clean up their balance sheets is a good indication that people understand the severity of the problem and are working to fix it," Edward Bretschger, director of equity sales and trading, at Calyon Securities in New York, told Reuters.
But, "while the news is giving a boost to others, the structure and details of the (Merrill) deal are starting to come to light and the stock is under pressure."
Moving the Market
There were no earnings or economic reports, but retail emerged as another active sector. Big discounts brought in last-minute Christmas shoppers over the weekend, but it remains to be seen if the late buying spree will be enough to turn around what has been a relatively weak December.
Retail stocks were enjoying a strong day, with gains posted at Wal-Mart, JC Penney, Macy's and Dillard's.
Among Dow components, leading gainers included financials American International Group and Citigroup, as well as Boeing and Microsoft.
Federal Express led Dow laggards following news late Friday that tax authorities had found the company owed more than $319 million in taxes and penalties for 2002 related to its independent contractor model at FedEx Ground.
Solarfun Power led the way on the tech-heavy Nasdaq as the solar energy company recouped some losses from last week.
In other news, Israel's Teva Pharmaceutical Industries said it has commercially launched pantoprazole sodium delayed-release tablets, the generic equivalent of Wyeth's Protonix tablets. Teva shares rallied on the news.
Shares gained for online game developer Giant Interactive after it announced a $200 million share buyback program.
Also, equipment rental group United Rentals gained after it terminated its $4 billion takeover by Cerberus Capital Management and asked Cerberus to pay it a $100 million termination fee.