Stocks advance following welcome increase in retail sales

NEW YORK — Better holiday sales and rising commodities prices pushed stocks to their sixth straight gain Monday on the New York Stock Exchange and to new highs for 2009.

NEW YORK — Better holiday sales and rising commodities prices pushed stocks to their sixth straight gain Monday on the New York Stock Exchange and to new highs for 2009.

Major indexes edged higher in light trading Monday after sales figures showed that U.S. shoppers spent more freely this holiday season, a 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 per cent from Nov. 1 through Dec. 24, compared with a 2.3 per cent drop a year ago. Adjusting for an extra shopping day between U.S. Thanksgiving and Christmas, the number was closer to a one per cent gain.

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

Meanwhile, commodities prices rose as the U.S. 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. The Dow Jones transportation average fell 0.6 per cent.

With fewer traders in the market due to the holidays, and without 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 for Christmas and will be closed again Friday for New Year’s Day.

The Toronto Stock Exchange was closed Monday for the Boxing Day holiday.

The Dow Jones industrial average rose 26.98, or 0.3 per cent, to 10,547.08, its highest close since Oct. 1, 2008. The Dow transportation average fell 24.37, or 0.6 per cent, to 4,163.49.

The Standard&Poor’s 500 index rose 5.39, or 0.2 per cent, to 1,127.78, and the Nasdaq composite index advanced 5.39, or 0.2 per cent, to 2,291.08.

Bond prices came off their lows after an auction of $44 billion of two-year notes saw sufficient demand. Bond prices have been falling in recent weeks, pushing yields higher as stocks continue to advance amid improving economic data.

In total, the Treasury Department is issuing $118 billion of debt this week. Investors have worried this year that demand for government debt would wane amid the massive amounts of supply. But so far, most auctions have gone smoothly.

The yield on the previously auctioned 10-year U.S. Treasury note, which moves opposite its price, rose to 3.85 per cent from 3.80 per cent Thursday.

Stocks added to moderate gains from last week, when major indexes ended 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 throughout December, but the gains have been more subdued than in recent months as investors have held back on making big moves going into the end of the year. The Standard&Poor’s 500 index is up 66.5 per cent since hitting 12-year lows in March.

Many investors are starting to consider industries that have underperformed the broader market during the rally, as well as companies that are likely to do well even if the economy grows at a slower pace than anticipated.

“2009 was a very kind year. Most industries, most stocks went up,” Creatura said. “In 2010, equities will have to earn their valuation.”

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 per cent.

Oil prices gained 72 cents to settle at $78.77 a barrel on the New York Mercantile Exchange. Gold also rose.

Shares of Delta Air Lines Inc., which owns Northwest, fell 48 cents, or 4.1 per cent, to $11.29. 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 narrowly outpaced those that fell on the New York Stock Exchange where volume came to a light 705.4 million shares.

In other trading, the Russell 2000 index of smaller companies fell 0.32, or less than 0.1 per cent, to 633.75.

Overseas, Japan’s Nikkei stock average rose 1.3 per cent to its highest close since late August, boosted by encouraging news on factory production.

Germany’s DAX index rose 0.8 per cent, while France’s CAC-40 rose 0.9 per cent. Markets in Britain were closed for a holiday.

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