Stocks rallied to new highs as the S&P 500 Index reached its highest close since Lehman Brothers went bankrupt in September 2008 amid light trading and several strong earnings reports.
The Dow Jones Industrial Average rose 55.03 points, or 0.5 percent, to close at 11,533.16, its highest closing value since Friday, Aug. 29, 2008.
JPMorgan , Bank of America , and American Expressled the blue-chip index higher, while 3M and Merck slipped.
The S&P 500 rose 7.52 points, or 0.6 percent, to close at 1,254.60, its highest level since the Friday before the Lehman Brothers' bankruptcy. The broad market index closed that day, Sept. 12, 2008, at 1,251.70, although it crept higher the following week—to 1,255.08.
The Nasdaq rose 18.05 points, or 0.7 percent, to close at 2,667.61, it's highest closing value since Friday, Dec. 28, 2007. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.
Most key S&P 500 sectors gained, led by financials, materials and energy. Consumer staples and healthcare fell.
The market is heading into end of the year on a strong note. The Dow is up about 4.8 percent for December and 10.6 percent for the year-to-date. For the month, the S&P 500 rose 6.27 percent, while it was up 12.51 percent for the year-to-date. The Nasdaq was up 6.78 percent for December, and 17.56 percent for the year-to-date.
The dollar gained slightly against a basket of currencies, as the euro fell amid news that China supports Europe's actions to contain sovereign debt troubles. Meanwhile, Moody's warned it may downgrade Portugal's debt rating.
The modestly stronger dollar didn't hurt commodities, including materials stocks and gold, which was up to more than $1,388 an ounce. The Thomson Reuters/Jefferies CRB Index rose. Oil prices, too, closed above $89 a barrel, supported by cold weather, forecasts of a drop in inventories and expectation of stronger U.S. gasoline demand.
Materials and industrials were the day's winners with shares of Rio Tinto , Posco and Caterpillar trading higher.
The market is also rallying on the heels of reports of robust holiday retail sales, said Art Hogan, chief market analyst at Jefferies.
In a note to clients, Jim O'Neill, chairman of Goldman Sachs Asset Management, declares 2011 the year the U.S. will return to "normal."Stocks will keep rising, probably another 20 percent, O'Neill wrote, and bond yields will rise as well, although perhaps shy of 5 percent, which he predicted before. O'Neill also expects the dollar could rally, although "U.S. policymakers will be eager to resist a significant increase."
Shares of AIG rose after news the U.S. Treasury plans to sell a big stake in the insurer in two stock offeringsnext year, according to Reuters. Any remaining stocks will be sold in 2012. AIG received $182.3 billion in money from the federal government during the financial crisis.
This comes after the government sold off its remaining shares in Citigroup earlier this month, marking an exit from ownership in the bailed-out banking giant with a $12 billion gross profit for taxpayers.
Shares of Internet service providers and Internet content providers all rose after the Federal Communications Commissions approved the first regulations of the Internet. The purpose was to ensure all stakeholders, including consumers, have access to the Internet, a concept called "net neutrality," through regulation, or whether the Internet should be left unregulated.
The rules passed on Tuesday treat providers including Comcast , AT&T , Verizon and Time Warner Cable more favorably than previous versions of the regulation, according to some observers.
Content providers, including Netflix , Amazon , Google and YouTube benefit, because their content can't be regulated. Providers wanted the ability to prevent data-heavy content that could slow their networks. While the FCC wouldn't allow the type of content to be regulated, providers can now perhaps charge for content.
On the M&A front, the Wall Street Journal is reporting that Genzyme is now open to an acquisition by Sanofi-Aventis , after it failed to attract an offer from rival pharmaceutical companies. Sanofi had solicited an $18.5 billion hostile offer for Genzyme, a biotechnology company, that had repeatedly been deflected. Genzyme still is rejecting a $69 a share offer by Sanofi, the Journal said.