Stocks Finish with Modest Gains

U.S. stocks closed higher Wednesday, extending recent gains as investors continued to bet that the economy is on the mend and that interest rates will remain low for some time. A rebound in the dollar trimmed some of the market's earlier gains.

The financial and basic materials sectors led the market higher.

U.S. equities took their cue from markets in Europe and Asia, which moved higher Wednesday as strong Chinese manufacturing and retail sales data encouraged investors to pour money into stocks.

On Wednesday, the 30-stock Dow Jones industrial average finished higher by 44.29 points, or 0.43%, at 10,291.26. The broad Standard & Poor's 500-stock index was up 5.50 points, or 0.50%, at 1,098.51. The tech-heavy Nasdaq composite index gained 15.82 points, or 0.74%, to 2,166.90.

On the New York Stock Exchange, 19 stocks were higher in price for every 11 that declined. Breadth on the Nasdaq was 17-10 positive.

U.S. government offices were closed Wednesday in observance of the Veteran's Day holiday.

The bond market was also closed.

Gold futures moved higher Wednesday, holding near record levels despite the dollar's firmness. December gold futures were up $12.40 to $1,114.90 per ounce in afternoon trading.

Crude oil futures rebounded in late trading after a mixed API inventory report. December crude oil futures were up 46 cents to $79.52 per barrel.

Some traders were bracing for Thursday's reports on weekly initial jobless claims and the Treasury budget.

Dealers cited by S&P MarketScope see the market headed higher as the Federal Reserve has flooded the market with cash and plans to keep interest rates low. Many skeptics are scrambling to get aboard the rally before yearend, says S&P. Some analysts see the S&P 500 index rising to the 1300 level by February.

Among companies in the news Wednesday, Toll Brothers (TOL) shares advanced after the homebuilder said fourth-quarter net signed contracts of about 765 units and $430.8 million rose 42% in units and 62% in dollars from the year-earlier period. The company said unit deliveries exceeded the high end of its guidance due to delivery of a higher percentage of its backlog, fewer cancellations, and the sale of quick delivery homes.

Macy's (M) shares slumped after the department store company offered disappointing sales guidance for the fourth quarter.

Adobe Systems (ADBE) shares fell after the software company said it will cut about 680 full-time positions worldwide as it moves to align costs in relation to its 2010 operating plan. Adobe expects to record a total of $65 million-$71 million in pre-tax restructuring charges, with about $18 million-$20 million of these charges to be recorded in the fiscal 2010 fourth quarter.

Robert Benmosche has told the board of American International Group (AIG) he is considering stepping down as chief executive of the government-controlled insurer, just three months after taking the job, according to people familiar with the matter cited in a Wall Street Journal story Wednesday. At a board meeting last week, the strong-willed industry executive told fellow AIG directors that he was "done" but agreed to think it over after other board members reacted with shock, according to the people. The executive is chafing under constraints imposed by AIG's government overseers, particularly a recent compensation review by the Obama administration's pay czar, Kenneth Feinberg, according to the people. In economic news Wednesday, the ABC News consumer comfort index increased three points to -46 in the week ended Nov. 8, its best level in a month. But the index remains in deeply negative territory. The survey said 11% of respondents expressed confidence in the economy, up from 10% the week before. Also, 45% of those polled said their own finances were in good standing, up from 42% the prior week. In assessing the buying climate, 25% of respondents said it was good, up from 24% a week earlier.

There were no other significant U.S. economic releases scheduled for release Wednesday.

October data from China showed continued strength: industrial production rose 16.1%, year-over-year, while retail sales jumped 16.2%.

Meanwhile, Japanese core machinery orders rebounded 10.5% in September from the previous month, well above expectations.

Traders Wednesday also examined comments from central bank officials. Fed President Lacker, in a CNBC interview, indicated the Fed was in no hurry to start to remove stimulus yet, let alone start to hike rates. He wouldn't be pinned down to saying they will start to tighten in 2010. He suggested he'll look to the labor market and general economic activity to determine the timing of an exit. He said he will look to tighten when the economy is strong enough and the recovery is well enough established. He was sanguine on inflation and inflation expectations, saying they are stable for now and likely for next year.

Dallas Fed President Fisher remains optimistic on the recovery, but said the positive impact the stimulus had on the economy is already starting to slow after a stronger than expected 3.5% surge in third-quarter gross domestic product (GDP). He also said the strong bounce in consumer spending that usually follows a recession is likely to be absent this time as consumers look to recalibrate savings and spending decisions. He said capital expenditures also are likely to be limited as uncertainties over new new government initiatives and regulation take their toll on business confidence and leave firms hesitant to add labor. He said the Fed already has begun unwinding some of its special liquidity programs, especially the commercial paper facility. But on when the Fed might begin to tighten policy, he said "it depends."

Bank of England Governor Mervyn King said the U.K. economy faces a "hard path" back to health and he has an "open mind" on further bond purchases, signaling officials aren't ready to withdraw stimulus yet.

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