Stocks climb on news of strong holiday retail sales

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NEW YORK (AP) – Better holiday sales and rising commodities prices pushed stocks to new 2009 highs.

Major indexes edged higher in midday trading today after data showed shoppers spent more freely this holiday season, a good sign that consumers are feeling better about the economy.

Figures from MasterCard Advisors’ SpendingPulse, which track all forms of payment, show retail sales rose 3.6 percent from Nov. 1 through Dec. 24, compared with a 2.3 percent drop a year ago. Adjusting for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent gain.

Consumer spending is one of the biggest drivers of economic growth and is vital to a sustained recovery.

Meanwhile, commodities prices rose as the dollar fell, giving a boost to energy and materials stocks.

Airline stocks fell, helping to keep the rest of the market in check, after two security incidents on Northwest flights this weekend.

With fewer traders in the market due to the holidays, and in the absence of any bad news, analysts say stocks are likely to drift higher during the final days of 2009.

“What’s going to stop this is a question on a lot of people’s minds,” said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors. “And the answer so far is nothing.”

Markets were closed on Friday for Christmas and will be closed again this Friday for New Year’s Day.

The Dow Jones industrial average rose 10.65, or 0.1 percent, to 10,530.75. The Standard & Poor’s 500 index rose 0.32, or 0.03 percent, to 1,126.80, and the Nasdaq composite index rose 4.72, or 0.2 percent, to 2,290.41.

Major stock indexes ended a holiday-shortened session Thursday at new highs for the year following upbeat reports on unemployment and durable goods orders. This week, readings on home prices and consumer confidence are among the few economic reports expected.

Stocks have managed to grind higher this month despite lingering concerns about the economic recovery. But the gains have been more subdued than in recent months as investors have held back on taking risks heading into the end of the year. The Standard & Poor’s 500 index is up 66.5 percent since hitting 12-year lows in March.

Jeff Buetow, managing partner at Innealta Portfolio Advisors, said he’s been pruning his portfolios in recent weeks and preparing for the coming year by adding higher dividend-yielding stocks in industries like utilities, telecommunications and consumer staples.

“I’m trying to figure out where in equities … is there some opportunity,” he said.

Bond prices fell, pushing yields higher ahead of a fresh round of government auctions. The Treasury Department will issue $44 billion of two-year notes later Monday, followed by $42 billion of five-year notes on Tuesday and $32 billion of seven-year notes on Wednesday. Investors often sell bonds heading into auctions in an effort to command higher yields.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.84 percent from 3.80 percent Thursday.

Commodities prices rose as the dollar fell. Commodities are priced in U.S. dollars, so when the greenback is weak they become more attractive to foreign buyers.

The ICE Futures U.S. dollar index, which measures the dollar against other major currencies, slipped 0.1 percent. Oil prices gained 62 cents to $78.67 a barrel on the New York Mercantile Exchange. Gold prices also rose.

Shares of Delta Air Lines Inc., which owns Northwest, fell 53 cents, or 4.5 percent, to $11.24. A failed attack on a Northwest flight on Christmas Day and another incident on the same flight to Detroit from Amsterdam on Sunday raised security concerns over the weekend.

Advancing stocks just barely outnumbered decliners on the New York Stock Exchange where volume came to a low 259.3 million shares.

In other trading, the Russell 2000 index of smaller companies fell 0.49, or 0.1 percent, to 633.58.

Overseas, Japan’s Nikkei stock average rose 1.3 percent to its highest close since late August, boosted by encouraging news on factory production. In afternoon trading, Germany’s DAX index rose 0.7 percent, while France’s CAC-40 rose 0.8 percent. Britain’s FTSE 100 was closed for a holiday.