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Stocks Pare Gains as Dollar Pushes Higher

Stocks pared gains Friday afternoon as the dollar gained strength. Consumer discretionary was a standout after reports showed retail sales rising and consumers' mood improving.

The Reuters/University of Michigan gauge of consumers' mood rose to 73.4from 67.4 at the end of November. Economists had only expected the measure to hit 68.5.

Retail sales rose 1.3 percent last month, more than double the 0.6-percent increase economists had expected. Excluding autos, retail sales jumped 1.2 percent, triple the 0.4 percent advance economists expected.

“It looks like households are not a bashful about using their wallets as we thought,” Joel Naroff of Naroff Economics wrote in a note to clients. But "[g]etting this economy moving faster will require the consumer to actually start thinking that spending money is okay," he said.

Among the other data points out this morning, import prices rose 1.7 percent for November and business inventories ticked up 0.2 percent in October.

The dollar hit a two-month high against the euroas the encouraging reports on the consumer reignited worries that the Fed would raise rates sooner than expected. Gold fell below $1,120 an ounceand oil dropped below $70 a barrel.

Consumer-discretionary stocks rallied, with Macy's up more than 5 percent and solid gains in RadioShack, Lowe's and Best Buy.

United Technologies was among the biggest gainers on the Dow after the company said late Thursday it expects profits to grow in 2010 after declining this year. The company's projected revenue was above Wall Street's most recent estimates, while the top of its projected earnings per share is also above estimates.

Rounding out the top three were Alcoa and GE.

Bank of America rose as Bank of New York Mellon Chief Executive Robert Kelly resurfaced as a possible candidatefor the CEO of Bank of America.

Positive sentiment is also surrounding Dow component Boeing, which says its long awaited 787 Dreamliner aircraft could have its first test flight on December 15.

In the financial space, ING Group said it will repay about $8.27 billion in aid to the Dutch government, about half of what it received during the financial crisis.

Shares of Yahoo also rose after Kaufman Brothers upgraded the company to "buy."

Winterizing Your Portfolio - A CNBC Special Report
Winterizing Your Portfolio - A CNBC Special Report

National Semiconductor slipped after the chip maker beat earnings expectations but said its revenue would be flat sequentially in the third quarter, spurring worries about its ability to regain market share.

Adding to the optimism, Moody's said the top credit ratings for the U.S. and Britain are not under threat of a downgrade at the moment, though a worst-case scenario could see a cut by 2013. Moody's classifies the U.S. and the U.K. as "resilient" rather than "resistant."

On Capitol Hill: The House is moving towards final passage of a sweeping financial regulation overhaul bill. Final votes could come today.

Videogame sales were down 7.6 percent in November, according to market research group NPD. That's despite the success of "Call of Duty: Modern Warfare 2", and could hit stocks like Electronic Arts and Activision Blizzard .

This Week:

FRIDAY: Copenhagen climate summit; Government report on retail sales; import/export prices; business inventories; Art Nadel hearing

- Reuters contributed to this report.

Send comments to cindy.perman@nbcuni.com.