NEW YORK (Reuters) - U.S. stocks rose on Tuesday, erasing much of the previous session's steep drop, as a strong December retail sales reading eased concerns that economic growth might be slowing.
Core U.S. retail sales increased 0.7 percent in December from the prior month, flying past the 0.3 percent gain economists had expected. Fourth-quarter economic growth prospects were further boosted by a report showing retail inventories, excluding autos, increased 0.6 percent in November.
The data followed Friday's payroll report, which showed job growth for December that was sharply below expectations.
"Retail sales numbers for December sort of calmed everyone down," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "Numbers indicate the economy is most likely moving forward at a nice pace despite an errant jobs number last Friday."
The Dow Jones industrial average <.DJI> rose 115.92 points or 0.71 percent, to 16,373.86, the S&P 500 <.SPX> gained 19.68 points or 1.08 percent, to 1,838.88, and the Nasdaq Composite <.IXIC> added 69.712 points, or 1.69 percent, to 4,183.016.
Tuesday's gains came a day after the S&P 500 posted its largest drop in two months, and market participants say they are gearing up for a more volatile 2014 after a year that saw U.S. stocks constantly go higher.
"We're seeing a good preview of what the year will bring, which is a little bit more volatility," said Andres Garcia-Amaya, Global Market Strategist at J.P. Morgan Funds.
The CBOE volatility index <.VIX> dropped 7.5 percent to 12.28 after gaining 9.4 percent on Monday.
"We got accustomed to very low volatility and (a VIX reading of) 14-16 is not out of the question," Garcia-Amaya said.
Shares of General Motors
Electric car maker Tesla
Both JPMorgan Chase & Co
With just 5 percent of the S&P 500 companies having reported quarterly results, 53.8 percent have beaten earnings expectations, according to Thomson Reuters data, below the 63 percent historical average. About 62 percent have beaten on revenue, above the long-term 55 percent average.
Bank of America Corp
Both GameStop Corp
In contrast, Intuitive Surgical
TWC shares gained 2.7 percent to $136 and Charter added 2.3 percent to $137.34.
Volume was roughly in line with the year-to-date average of about 6.5 billion shares traded on U.S. exchanges, according to data from BATS Global Markets. Monday's sharp decline came in volume of 7.22 billion shares.
Advancing stocks outnumbered decliners on the NYSE by 12 to 5 and on the Nasdaq three issues rose for every one that fell.
(Reporting by Rodrigo Campos; Editing by Nick Zieminski and Leslie Adler)
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