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Stocks close higher, extend month’s big gains

Investors shook off some their worries about Dubai's financial problems and extended the stock market's big November gain.
/ Source: The Associated Press

The stock market closed out its best month since the summer, posting big gains for November even as investors worried about the strength of the holiday shopping season.

Stocks fluctuated through the day Monday, but finished modestly higher as traders ultimately were not deterred by reports that retail sales were overall uninspiring during the Thanksgiving weekend. Retailers including Macy's Inc. and Saks Inc. fell sharply but online merchants like Amazon.com Inc. shot higher on reports of strong Internet sales.

Despite the tepid finish, the Dow Jones industrial average and the Standard & Poor's 500 index rose more than 5 percent in November, their biggest monthly advance since July.

Investors might not be surprised that holiday sales are not robust because consumer confidence is low and unemployment is above 10 percent. They also are buying stocks because other investments, such as Treasurys, don't offer the big returns that companies' shares do.

Preliminary figures by ShopperTrak, a research firm that tracks more than 50,000 outlets, showed that sales rose 0.5 percent on Friday, the start to the holiday shopping season. Online sales jumped 11 percent Thursday and Friday, according to comScore, an Internet research firm.

Investors have been worried that rising unemployment would make shoppers reluctant to spend during the holidays. Traders are already looking to the government's November unemployment report, which is due Friday, for clues about how consumers will spend during December and beyond.

The National Retail Federation, a trade group, said Sunday it still expects holiday sales to slip 1 percent compared with last year.

Benny Lorenzo, CEO of the investment bank Kaufman Bros. in New York said investors are cautious about holiday sales so far, but he also pointed to Internet retailers as one area of strength.

"Certainly in a market like this it could've been a lot worse for sure," he said.

A late-day report that Dubai was working on restructuring its debt gave stocks a lift. Investors, satisfied for the moment that credit problems in the Middle Eastern city-state of Dubai would be addressed without spreading, turned their attention to consumers, whose spending is the biggest driver of the U.S. economy.

The Dow rose 34.92, or 0.3 percent, to 10,344.84. The broader S&P 500 index rose 4.14, or 0.4 percent, to 1,095.63, and the Nasdaq composite index rose 6.16, or 0.3 percent, to 2,144.60.

Three stocks rose for every two that fell on the New York Stock Exchange, where volume came to a moderate 1.3 billion shares.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.20 percent from 3.21 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.06 percent from 0.01 percent.

The dollar fell against other major currencies, while gold rose.

Ethan Anderson, a senior portfolio manager at Rehmann Financial in Grand Rapids, Michigan, said record-low interest rates are leaving even hesitant investors with few options for generating decent returns, so they keep buying stocks although they're wary about whether the market can keep rising.

"A lot of investors right now are looking for a reason to get out," he said. "The question is where else can you put your money."

The stock market's modest moves came after stocks tumbled Friday on concern about Dubai's debt problems. The Dow ended with a loss of 155 points after being down more than 200 in the early going.

Investors were initially anxious about the possibility that a debt default by Dubai could touch off a new round of lending problems even as credit markets are still recovering from last year's near-shutdown following the collapse of Lehman Brothers.

The market drew some support from an unexpected improvement at factories. The Chicago Purchasing Managers index, which measures Midwestern manufacturing, rose to 56.1 in November from 54.2 in October. New orders rose and employment improved, while production expansion slowed.

Among retailers, Macy's slid 66 cents, or 3.9 percent, to $16.31, while Target Corp. fell $1.14, or 2.4 percent, to $46.56. Luxury department store Saks Inc. fell 42 cents, or 6.4 percent, to $6.11.

Online sellers advanced. Amazon jumped $4.17, or 3.2 percent, to $135.91, while eBay Inc. rose $1.25, or 5.4 percent, to $24.47.

Most financial stocks rose as fear about Dubai eased but American International Group Inc. tumbled on concerns that the insurer doesn't have adequate reserves to pay some potential claims. Todd Bault, a Sanford Bernstein analyst, said AIG faces an $11 billion shortfall to cover potential claims at its property and casualty insurance business, according to CNBC.

An AIG spokeswoman declined to comment. The stock fell $4.90, or 14.7 percent, to $28.40.