Stocks Fret Fed

Even so, the major indices had big years for the bulls, as the Dow rose 16.3%, the S&P 500 gained more than 13%, and the Nasdaq added 9.5%.

Shares of Dow component Home Depot (HD Quote) finished higher after the company said Chairman and Chief Executive Bob Nardelli has resigned. The home-improvement retail chain said the decision was mutual.

Nardelli will be replaced by Vice Chairman Frank Blake. Home Depot closed the session up 91 cents, or 2.3%, at $41.07.

Also in corporate news, Wal-Mart (WMT Quote) said during the extended weekend that December same-store sales are expected to have climbed 1.6% from year-ago levels. The forecast is well above the previous estimate of a 1% rise. Wal-Mart gained $1.37, or 3%, to $47.55.

Warnings from Lennar (LEN Quote) and Nabors Industries (NBR Quote) weren't dampening the mood, even though their weak forecasts meant a glum kickoff to the preannouncement season. Earnings reports for the fourth quarter of 2006 will begin to appear in earnest in about two weeks.

Elsewhere, RR Donnelley (RRD Quote) said it would buy book printer Von Hoffmann for $412.5 million in cash. The stock rose 68 cents, or 1.9%, to close at $36.22.

The economic calendar included a delayed report on December manufacturing from the Institute for Supply Management, which showed an increase to 51.4 from 49.5, above the consensus 50.0.