Stocks kicked off December with a rally Tuesday as Dubai fears subsided and the dollar retreated, pushing gold to a new record above $1,200 an ounce.
The Dow Jones Industrial Average gained 126.74, or 1.2 percent, to close at 10,471.58, its highest level since since October 2008. The S&P 500 added 1.2 percent and the Nasdaq advanced 1.5 percent.
The CBOE volatility index, widely considered the best gauge of fear in the market, dropped more than 10 percent to 21.91.
On the M&A front, General Electric and Comcast have apparently reached a deal for joint ownership of NBC Universal, the parent of CNBC.
Auto makers reported their November results today.
Ford said its sales rose 8.6 percent, better than expected.
General Motors sales rose 6.3 percent, just shy of the 7 percent expected, but Chrysler's sales tumbled 25 percent from an already weak level last year.
GM dropped a bombshell after the closing bell, saying CEO Fritz Henderson will step down. Chairman Ed Whitacre will assume the role on an interim basis until a permanent successor is found.
Pfizer was the biggest gainer on the Dow, up 3.7 percent, after the drug maker said it has acquired the rights to a treatment for a Gaucher disease, a rare genetic disorder that triggers the accumulation of a fatty substance in cells and some organs. Rare-disease treatments have become increasingly attractive to drug makers as treatments are often expensive and the revenue generated can be substantial.
Most Dow components advanced, except for JPMorgan and American Express — two of the best performers in Monday's session — and Kraft .
Financials were the weakest performer of 10 key S&P sectors after analyst Dick Bove said he's concerned that the government wants to increase capital requirements for banks. Of the top 30, Bove said, only 4 don't need to raise capital: Citigroup, State Street, Northern Trust and First Horizon.
AIG shares rallied 8.6 percent after the insurance giant reduced its debt to the government by $25 billion, giving the government stakes in two of its units totaling that amount ahead of their planned spinoff.
In the day's economic news: The ISM reported its gauge of manufacturing activity slipped to 53.6 in November from 55.7 in October, missing expectations but still in growth mode. Anything over 50 represents expansion. Pending-home sales rose 3.7 percent to their highest level in 2 1/2 years and construction spending was unchanged — both for October.
This came after stocks pulled off a modest gain Monday, with the Dow up 0.3 percent and closing the month up 6.5 percent.
Global markets seemed assuaged by Dubai's restructuring plans, with most major indexes in Europe and Asia up more than 1 percent.
In China, two business surveys suggested the economy is poised for growth in 2010.
The dollar retreatedagainst most major currencies, and both oil and gold rose — gold topped $1,200 an ounce, before settling at $1,199.10.
Retail stocks finished mostly higher, after sliding on Monday, as analysts slice, dice, mince and wedge early statistics from the holiday-shopping season. Home Depot and Amazon rose, while Macy's fell.
Staples jumped 4.8 percent after the office-supply store beat earnings expectations and projected sales growth in the fourth quarter.
Volume was on the light side, with 1.13 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 4 to 1.
Correction: An earlier version of this story said Credit Suisse downgraded its rating AIG to "underperform" today. Credit Suisse actually downgraded the stock to "underperform" in September and reiterated that rating a few weeks ago.
Still to Come:
TUESDAY: Obama speaks tonight
WEDNESDAY: Weekly mortgage applications; weekly crude inventories; Challenger, ADP jobs reports; Fed's Lacker speaks; Fed's beige book; Earnings from Aeropostale
THURSDAY: Chain-store sales; weekly jobless claims; ECB, UK rate meetings; Bernanke renomination hearing; ISM services index; Earnings from Toll Brothers, Marvell Tech and Novell
FRIDAY: November jobs report; Fed's Plosser, Bullard speak; factory orders; Earnings from Big Lots
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