Stocks advanced, following encouraging reports on jobless claims and the trade deficit. Budding optimism about the recovery made consumer-discretionary stocks the day's best performer. Disney led the Dow.
The Dow Jones Industrial Average gained 68.78, or 0.7 percent, to close at 10,405.83. The S&P 500 added 0.6 percent and the Nasdaq rose 0.3 percent.
A weak Treasury auction pushed the Dow off its high for the day. The Treasury sold $13 billion of 30-year bonds at a high yield of 4.52 percent; the bid-to-cover ratio was 2.45.
But economic news was encouraging: The Labor Department said the number of newly laid-off workers seeking jobless benefits rose by 17,000last week but the four-week moving average, which smooths out weekly fluctuations, dropped by 7,750 to 473,750 — its lowest level since September 2008.
"After five straight weekly declines, a correction in these noisy data was bound to happen sooner or later; the week after Thanksgiving, with its huge seasonal adjustment factor, was always a good candidate," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.
A separate report showed the trade deficit shrank 7.6 percent in October to $32.9 billion. Economists had expected the gap to widen to about $36.8 billion.
The dollar ended flat against euro. Oil settled below $71 a barrel, while gold rebounded to near $1,130 an ounce.
Consumer-discretionary stocks were the best performer among 10 key S&P sector indexes, up 1.4 percent. Starbucks, Amazon and Sears were at the top of the pack.
Disney was one of the biggest gainers on the Dow after CEO Bob Iger said the advertising market is improving, with ABC's fourth-quarter advertising up about 25 percent in the fourth quarter, though the recovery remains shaky.
This echoed similar comments from other media execs in recent days, including CBS CEO Les Moonves, News Corp. COO Chase Carey and Viacom CEO Philippe Dauman.
Coca-Cola shares rose after resolving a dispute with Costco.
Costco rose after the the largest warehouse retailer beat earnings expectations.
AOL shares fell on their debut on the New York Stock Exchange, as the Internet unit's spinoff from Time Warner became official this week. Time Warner shares jumped.
CIT Group shares jumped after the small-business lender emerged from bankruptcy.
Citigroup shares rose after the bank said it wants to repay TARP money by raising capital in an equity offering.
Bank of America , which already announced plans to repay its TARP loan, saw its shares fall.
There was a lot of buzz about Goldman Sachs , which announced plans to pay bonuses in stock, which can't be touched for five years, instead of cash.
General Electric shares slipped despite news that the conglomerate won a $1.4 billion contract from Caithness Energy to provide wind turbines for what will be the world's largest wind farm, Shepherds Flat, in Oregon.
Apple shares rose fell following news that the company plans to overhaul its iTunes software to allow users to buy and listen to anywhere using a Web browser, not just on the computer they downloaded it to.
Research In Motion shares continued to benefit from traders' bet on the BlackBerry maker's growth in China.
Shares of Ciena fell after the networking-gear maker posted a wider-than-expected loss as higher costs ahead of its acquisition of Nortel Networks offset strong revenue.
United Technologies advanced after JPMorgan raised its price target on the stock to $74 from $70.
On the homefront, RealtyTrac reported that foreclosure filings fell 8% in November, even as millions of borrowers continue to be evaluated for the administration's foreclosure prevention effort. This afternoon, the government will release its latest figures on loan modifications, including how many have gone from "trial" to "permanent" status.
ALL WEEK: Copenhagen climate summit
THURSDAY: BoE rate decision; AOL shares begin trading; international trade; weekly jobless claims; Geithner speaks; 30-year auction; Earnings from Costco
FRIDAY: Government report on retail sales; import/export prices; business inventories; Art Nadel hearing
- Reuters contributed to this report.
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