Stocks Gain on Recovery Optimism

Better than expected reports on new home sales and personal income, along with a fall in jobless claims, boosted equities Wednesday

Major U.S. stock indexes closed higher in slow pre-Thanksgiving trading Wednesday, rising in step with gains in commodities as favorable reports on home sales, jobless claims, and consumer sentiment fanned optimism that the economic recovery is continuing.

"We had a remarkably heavy calendar of U.S. economic reports [Wednesday] in advance of the Thanksgiving Day holiday, and the array of modest surprises were arguably skewed toward a somewhat improved outlook," said Action Economics chief economist Michael Englund in a note Wednesday.

A weaker dollar contributed to these advances, as it made riskier investments appear more attractive. Keeping stocks' gains in check was a surprise drop in durable goods orders.

U.S. markets will close Thursday for the Thanksgiving Day holiday.

On Wednesday, the 30-stock Dow Jones industrial average finished higher by 30.69 points, or 0.29%, at 10,464.40. The broad Standard & Poor's 500-stock index was up 4.98 points, or 0.45%, at 1,110.63. The tech-heavy Nasdaq composite index gained 6.87 points, or 0.32%, to 2,176.05.

On the New York Stock Exchange, 20 stocks were higher in price for every 10 that declined. Breadth on the Nasdaq was 14-12 negative.

Treasuries were higher after a strong $32 billion auction of seven-year notes Wednesday afternoon. The 10-year note was lower in price at 100-10/32 for a yield 3.345%, while the 30-year bond was lower at 101-10/32 for a yield of 4.300%.

The dollar was skidding Wednesday after the FOMC said Tuesday that its decision to cut interest rates to zero may be fueling undue financial-market speculation even as it called the dollar's slide "orderly." The U.S. dollar index was sharply lower at 74.50.

The steep drop in the dollar index supports the case for further upside in equities, says S&P technical analyst Chris Burba. "Dollar weakness is conducive to carry trades, which involve buying U.S. stocks and other securities with dollars that were borrowed at a low interest rate. As long as asset prices keep rising, interest rates stay down and the dollar value is stable or weakening, the trade stays profitable."

February gold futures were up $19.80 to $1,187.20 per ounce Wednesday afternoon, just below the record high of $1,189.00 reached earlier in the session. In addition to the weaker dollar, gold's rise was also being propelled by a newspaper report that India is open to buying more gold from the International Monetary Fund. Market experts see the yellow metal heading for $1,200 per ounce soon.

January West Texas Intermediate crude oil futures were up $1.34 to $77.36 per barrel in afternoon trading after weekly U.S. inventory data showed crude oil stocks rising 1.0 million barrels in the past week, while gasoline stocks climbed 1.0 million barrels.

European stocks moved higher Wednesday. In London, the FTSE 100 index gained 0.77%. The CAC 40 index in Paris advanced 0.65%. Germany's DAX index rose 0.58%.

Asian markets finished in the green. Japan's Niikei 225 index rose 0.43%. The Hang Seng index in Hong Kong added 0.84%. Shanghai's benchmark index jumped 2.07%.

Among stocks in the news Wednesday, shares of

Tiffany & Co. (TIF) gained 4.9% after the company posted third-quarter earnings per share (EPS) from continuing operations of 34 cents, vs. 36 cents EPS one year earlier, on 6% lower same-store sales and 3% lower total sales. Wall Street was looking for EPS of 24 cents. The luxury retailer sees a mid-single-digit percentage increase in worldwide sales for the fourth quarter, with EPS from continuing operations of $1.88-$1.98 (vs. previous guidance of $1.65-$1.75).

Deere & Co. (DE) shares advanced 2.7% after the farm equipment maker posted fourth-quarter non-GAAP EPS of 23 cents on 28% lower worldwide net sales. Deere posted a GAAP loss of 53 cents for the quarter, which includes charges of 76 cents per share, due to the previously announced impairment of goodwill related to John Deere Landscapes reporting unit and voluntary employee-separation expenses associated with the formation of the new agriculture and turf division. Deere expects company equipment sales to be down 1% for fiscal 2010, and down about 10% for the first quarter of fiscal 2010.

J. Crew Group (JCG) rose 7.8% after the company reported third-quarter EPS of 67 cents, vs. 30 cents EPOS one year earlier, on an 8% same-store sales rise and a 14% total sales rise. The apparel retailer sees fourth-quarter EPS of 37 cents-42 cents.

TiVo Inc. (TIVO) fell 6.8% after reporting a third-quarter loss of 6 cents per share, vs. EPS of 98 cents (including EchoStar litigation related items) on a 12% revenue drop.

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