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Stocks End Near Highs, S&P Positive for 2011

Stocks climbed steadily to finish near their best levels Thursday as the euro erased its drop versus the greenback and after a handful of better-than-expected economic data.

But volume remained thin in the final week of trading for the year.

The Dow Jones Industrial Average soared 135.63 points, or 1.12 percent, to close at 12,287.04, led by JPMorgan and BofA .

The S&P 500 jumped 13.38 points, or 1.07 percent, to finish at 1,263.02, moving back into positive territory for the year. The Nasdaq rallied 23.76 points, or 0.92 percent, to end at 2,613.74.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended below 23.

All 10 S&P sectors finished firmly in positive territory, led by financials and industrials.

“The market will come back to fundamentals…with all the negative headline news, the market was able to salvage modest gains at best,” Eric Thorne, portfolio manager of Bryn Mawr Trust Wealth Management. “I think we’re going to be looking at a hotter economy than a lot of people expect and that’s going to lead to better stock prices and investors in stocks will do pretty well in 2012. It’s really bonds that we’re worried about at this point.”

Meanwhile in Europe, Italy sold just over 7 billion euros ($9 billion) in an auction of longer-term debt, with yields falling.

The yield on Italian 10-year bonds fell from the euro era highs reached in November, settling slightly below the market-sensitive level of 7 percent in an auction on Thursday.

Investors were looking to the auction of longer term Italian bonds to see whether appetite for the country's debt had returned, after yields halved in the sale of six-month T-bills on Wednesday.

The euro pared its early losses against the dollarto rise back above $1.29. Gold slumped to its lowest level in almost six monthsto settle near $1,540 an ounce.

On the economic front, weekly jobless claims rose slightly to a seasonally adjusted 381,000, according to the Labor Department, but remained under the key 400,000 level for the fourth straight time.

“All the data we’ve seen today has been neither good nor bad including the Italian auction—it wasn’t horrible, it was not great,” said Jim Iuorio, director of TJM Institutional Services. “The jobless claims were a little worse than expected, but much better than they were a couple months ago. So we never get any clarity in anything, it’s a slow moving trend towards better.”

Also, pending home sales soared to a 19-month highin November, according to the National Association of Realtors.

Homebuilders rallied following the news, including Beazer , Pulte and Lennar .

And business activity in the Midwest rose more than expected in December, according to Institute for Supply Management-Chicago.

China's e-commerce company Alibaba Grouphired a lobbying firm in Washington, in what Reuters said could be a sign that the company would be willing to bid for Yahoo if talks to unwind their Asia partnership fail.

Mosaic slipped after the fertilizer producer said it will slash its phosphate production because prices have fallen to unsustainable levels.

Standard & Poor's placed Sears' credit rating on review for a possible downgrade, saying the retailer's plan to close at least 100 stores may not do much to improve its performance.

Diamond Foods soared following rumors that hedge fund manager David Einhorn may have invested in the company.

Meanwhile, Verizon said it will start charging a $2 "convenience fee" from mid-January for every payment made over the phone or online with their credit cards.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC

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