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The GOP Victory Could Make 2011 the Year of the Put-Back

Stocks gained after President Barack Obama said he was open to extending the Bush-era tax cuts to all income levels.

The market was already substantially higher in response to the Federal Reserve's decision to buy $600 billion in Treasury bonds to boost the economy.

The Dow Jones Industrial Average rose more than 190 points, led by big multinational companies, a day after hitting a two-year highfollowing the Fed's move.

Boeing and Caterpillar and Alcoa led the blue-chips higher.

The S&P 500 Index and the Nasdaq both advanced decisively, with the S&P 500 breaking through 1,200. The Nasdaq was on track for its highest close since January 2008.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, sank more than 6 percent to nearly 18.

All key S&P sectors were higher, led by energy, materials and industrials.

The news that President Obama

might consider a compromise

with Republicans over the tax breaks came from White House spokesman Robert Gibbs two days after voters handed the House of Representatives to the Republicans.

World stocks also got a boost from the Fed's decision, rising to their highest level since the collapse of Lehman Brothers two years ago. The MSCI all-country world index rose 1.4 percent to 324.12 Thursday, higher than its been since Sept. 9, 2008. The index has gained 8.2 so far this year.

Earlier on Thursday, the Bank of Englandand theEuropean Central Bank left their benchmark interest rates unchanged.

The steady upward climb of the major U.S. indices on Thursday reflects the Fed's plans to pump money into the economy, on top of the fact the economy is already strengthening, said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.

Detrick described it as a "double-dose of buying pressure."

Another driver behind the surge was the market's negativity ahead of a week filled with news, including the mid-term elections, the Fed's decision, and the nonfarm payroll report on Friday.

The expectation was that the market would sell off on the news, but when that didn't happen, the buyers stepped in.

"The market is the best indicator we know of for what the economy is going to do," Detrick said. "It's making a bet the economy will turn around in the next six to nine months."

In economic news, new U.S. claims for unemployment benefits rose 20,000to a seasonally adjusted 457,000, according to the Labor Department said, reversing a decline from last week when claims fell to a revised 437,000. Analysts had estimated claims would rise to 443,000, Reuters said.

But in a more positive sign for the economy, nonfarm productivity for the third quarter rose 1.9 percent, more than expected, while unit labor costs fell 0.1 percent, which was less than expected.

The Fed's decision to pump more money into the economy pushed the dollar to an 11-month lowagainst a basket of currencies on Thursday, giving a boost to industrial companies that sell goods abroad, where their products will be more competitively priced. Freeport McMoran , International Paper , and U.S. Steel were among the gainers.

In an effort to reassure markets, Fed President Ben Bernanke said the central bank's efforts to stimulate the economy won't spark excess inflation, as some have feared. In an op-ed article in the Washington Post, Bernanke said high unemployment, and excessively low inflation, were bigger worries.

Meanwhile, the lower dollar drove oil prices higher. Oil surged more than 2 percent to more than $86 a barrel, a six-month high. Energy stocks were among the best performers on the S&P 500, including Halliburton , Schlumberger , Chevron , ConocoPhillips and ExxonMobil .

Monthly retail sales figuresfor October were largely better-than-expected, although warm fall weather muted sales in some categories. Some large department stores fared well, including Macy's , Saks and chain retailers Gap and Limited .

Kohl's and JC Penney's , however, didn't fare as well. Teen retailers also lagged, including American Eagle , Aeropostale and Hot Topic , although Zumiez's sales soared.

Big cap technology stocks led the Nasdaq to a two-week high. That was helped by Qualcomm , which released surprsingly strong profits and said results for the year would beat expectations, thanks to strong demand for its smartphone chips.

Also, Microsoft rose after news it had lifted its sales forecastfor the Kinect, a video game device that plugs into its Xbox 360 and turns it into a motion-control game console. Other big cap tech stocks gained as well, including Apple, Google, Intel and Cisco.

Earnings news continued on Thursday. Time Warner Cable's shares jumped after the cable provider reported its net income rose to $360 million or $1 a share, up from $268 million or 76 cents a share a year before. Meanwhile, Time Warner reported losing 155,000 video subscribers in the third quarter, more than double the number it lost a year earlier.

Investors were likely to keep an eye on BHP Billiton and Potash , as the Canadian government rejectedBHP's $39 billion dollar hostile takeover bid for Potash.

In Europe, consumer goods group Unilever reported a 3.6 percent rise in third-quarter sales but warned that higher commodity costs were putting pressure on its profit margins.

Deutsche Telekom reported sales growth driven by mobile data services.

On Tap Next Week:
THURSDAY: After-the-bell earnings from Kraft, Activision and Starbucks.
FRIDAY: Pending home sales index, non-farm payrolls report, consumer credit; Kansas City Fed President Hoenig speaks; before-the-bell earnings from Toyota; after-the-bell earnings from Berkshire Hathaway.

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