Stocks Log 2% Gain, Back in Black for 2011

Stocks finished sharply higher Friday, extending their gains for a second session, amid signs of stabilization in the euro zone and after a better-than-expected consumer report.

All three major averages are now in positive territory for 2011.

The Dow Jones Industrial Average rallied 259.89 points, or 2.19 percent, to finish at 12,153.68.

The S&P 500 added 24.16 points, or 1.95 percent, to close at 1,263.85. The Nasdaq surged 53.60 points, or 2.04 percent, to end at 2,678.75.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished near 30.

For the week, the Dow gained 1.42 percent, while the S&P climbed 0.85 percent. However, the Nasdaq slipped 0.28 percent. Among Dow components, Merck was the biggest gainer for the week, while BofA was the worst performer.

Nine out of 10 S&P sectors finished in positive territory for the week, led by health care. Financials slipped.

Trading volume was the lightest in almost four months, while the U.S. bonds market was closed to honor Veteran's Day.

“The wild card continues to be Europe—part of the volatility is that the market does not understand what to do and that piece will continue—Europe is probably several steps behind where we are in the U.S.,” said Peter Coleman, director of research at JMP Securities. “Things are slowly improving for the U.S. economy, but at the rate of growth that we’re at, it wouldn’t take a big shock somewhere in the world to impact us.”

The Italian Senate passed a new budget lawthat would allow for final approval of the package in the lower house over the weekend and the formation of an emergency government.

The move could pave the way for Prime Minister Silvio Berlusconi’s resignation and the appointment of Mario Monti as his replacement.

Meanwhile, Greece’s new Prime Minister Lucas Papademos will be naming a new crisis cabinet. However, Papdemos faces an uphill battle, with opposition growing to more belt-tightening in the debt-ridden nation.

"Markets seem to be pleased that we're moving away from two big uncertainties," said Lorne Baring, Managing Director of B Capital, referring to Italy and Greece. "Once we get the big macro risk of Europe under control, we can go back to looking at fundamentals. Corporate balance sheets are in the best place ever...and all of this points to a more robust corporate sector."

On the economic front, consumer sentiment jumped in early November, its highest level in five months, according to the Thomson Reuters/University of Michigan's preliminary reading.

Among earnings, Walt Disney rose after the media conglomerate posted sales that beat expectations as advertising rose at the company's cable networks and theme park revenue increased.

Nvidia gained after the chipmaker posted results that topped estimates, although its revenue forecast was a bit lower than expected. Meanwhile, Citigroup raised its price target on the firm to $17 from $14.

Activision Blizzard slipped even after the videogame publisher said its latest "Call of Duty: Modern Warfare 3" game racked up more than $400 million in saleson its first day in stores.

Caterpillar rallied after the heavy equipment maker said it will shift production of some equipment from Japan to North America to be closer to customers in the Americas and Europe.

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Coming Up Next Week:

MONDAY: MF Global bankruptcy proceedings, 13-F filings due; Earnings from JCPenney, Lowe's, Urban Outfitters
TUESDAY: Fed's Bullard speaks, Fed's Evans speaks, PPI, retail sales, Empire state mfg survey, Fed's Williams speaks, business inventories, Fed's Lacker speaks, Fed's Fisher speaks, Amazon's tablet ships, credit card default rates reported; Earnings from Home Depot, Wal-Mart, Staples, TJX, Beazer Homes, Dell
WEDNESDAY: Weekly mortgage apps, CPI, industrial production, housing market index, oil inventories, Fed's Lacker speaks, Fed's Rosengren speaks, LA auto show; Earnings from Abercrombie & Fitch, Target, Applied Materials, Limited Brands, NetApp
THURSDAY: Housing starts, jobless claims, Philadelphia Fed survey, Fed's Pianalto speaks, Motorola Mobility votes on Google acquisition, GM IPO 1-year anniversary; Earnings from Dollar Tree, GameStop, Ross Stores, Sears, Gap, Marvell Tech
FRIDAY: Leading indicators; Earnings from Heinz

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