Stocks End Higher on Better Retail Sales

Better-than-expected holiday sales at some retailers may be a sign that the economic recession will be less dramatic than feared

Stocks finished higher, but off the highest levels, amid positive news about holiday sales from a few retailers such as Wal-Mart Stores (WMT ), which said it will report better-than-expected holiday sales.

In general, retailers were expected to be hard-hit by a lackluster holiday shopping season, and sharp discounting over the next several weeks should further cut into profit margins.

However, investors were cheered Wednesday by news that Wal-Mart sees December same-store sales growth at the high end of a 4% to 6% range, thanks to higher sales of electronics, women's apparel and toys. Solid performances by Wal-Mart and others are suggesting the economic recession may be less severe than expected.

Internet retailers like Amazon (AMZN ) and Yahoo! (YHOO ) and auction site eBay (EBAY ) also lifted investors' spirits. Yahoo!, for one, said transactions jumped 86% for the holiday season, compared to the same year-ago period.

Jewelry retailers Zale (ZLC ) and Tiffany's (TIF ) were higher on upgrades from investment banks, who are bullish on their holiday sales performances.

Oil and gas stocks were also up as energy futures surged on the colder weather in the Northeast and hopes that OPEC will cut output next week. Other sectors on the rise were cellphone companies, semiconductor makers, electronic equipment and gaming companies.

Among tech stocks, EchoStar Communications Corp. (DISH ) plans to expand Hughes' Spaceway unit, according to a Wall Street Journal article Wednesday. EchoStar is awaiting a decision from U.S. regulators on its $26 billion merger with satellite TV provider Hughes Electronics (GMH ).

For the rest of the week, investors will be busy with end-of-year tax selling and other portfolio adjustments, according to Standard & Poor's MarketScope. Trading was light Wednesday, but could get more active as significant economic data is released later in the week, S&P adds.

Updates on November durable goods orders, November new and existing home sales and December consumer confidence are due later in the week.

The Dow Jones industrial average finished up 52.80 points, or 0.53%, to 10,088.14. The Nasdaq composite index gained 16.22 points, or 0.83%, to 1,960.70. The broader S&P index rose 4.72 points, or 0.41%, to 1,149.37.

Treasury Market

Treasuries finished lower on strength in equities and on portfolio adjusting before the end of the year. A record-sized auction of two-year notes set for Thursday is also keeping prices down. In general, treasuries are expected to trade sideways before the start of the new year as the Federal Reserve's interest rate policy is less clear after twelve cuts in 2001.

In economic data, an update on retail sales showed continued weakness. The Redbook Retail Sales Average dropped 4.5% in the three weeks ended Dec. 22 compared to the same period last month.

World Markets

All European stock markets were closed Wednesday for the extended holiday. On Monday, the Financial Times-Stock Exchange 100 ended higher by 18.20 points, or 0.35%, to 5,177.40. In France, the CAC 40 index finished up 2.76 points, or 0.06%, to 4,502.10. Germany's DAX rose 84.87 points, or 1.72%, to 5,019.01 last Friday. These markets will reopen Thursday.

In Asia, stocks finished mostly firmer. Japan's financial markets closed lower for a fourth straight session, down 0.61%, to 10,192.57. In Hong Kong, markets were closed. On Monday, the Hang Seng rose 51.68 points, or 0.46%, to 11,209.78.

By Amy Tsao

Before it's here, it's on the Bloomberg Terminal.