Stocks Extend December Rally on Weak Dollar

The Dow gains ground as a dip in the U.S. dollar boosts the appeal of energy and basic materials stocks. Gregg Greenberg has The Real Story.
By Melinda Peer ,

NEW YORK (

TheStreet

) -- Stocks rose modestly on Wednesday, continuing their march higher in December as a weaker U.S. dollar helped lift energy and basic materials stocks.

The

Dow Jones Industrial Average

finished with a gain of 10 points, or 0.09%, closing at 11,585. The blue-chip index traded in a tight range of a little more than 50 points for the day, reaching a high of 11,625 in early afternoon trades before pulling back toward the close. The Dow has clocked more than 5% of its year-to-date rise of 11% this month, and the other major indices have followed a similar pattern.

The

S&P 500

added 1 point, or 0.1%, to finish at 1260, making for a fourth consecutive positive finish. The index has surged 6.7% in December. The

Nasdaq Composite

finished 4 points, or 0.2% higher, at 2667, putting it up 6.3% so far this month.

The greenback weakened against a basket of currencies with the dollar index down by 0.8%. Bond prices strengthened after the U.S. Treasury's $29 billion sale of seven-year notes saw strong demand with a bid-to-cover ratio of 2.86 and foreign buyers making 64% of the bidding. The benchmark 10-year Treasury note strengthened 1 3/32, diluting the yield to 3.357%.

.

Despite the lower dollar, the February crude oil contract shed 37 cents, or 0.4%, to settle at $91.12 a barrel. The February gold contract added $7.60, or 0.5%, to settle at $1,413.50 an ounce.

65% of stocks advanced while 33% declined. Breadth within the Dow finished slightly positive with 17 of the index's 30 components moving higher, including

Chevron

(CVX) - Get Report

,

DuPont

(DD) - Get Report

.

McDonald's

(MCD) - Get Report

,

Walt Disney

(DIS) - Get Report

and

Wal-Mart

(WMT) - Get Report

were also bright spots.

Alcoa

(AA) - Get Report

,

Cisco Systems

(CSCO) - Get Report

,

Home Depot

(HD) - Get Report

,

JP Morgan Chase

(JPM) - Get Report

and

Procter & Gamble

(PG) - Get Report

were the biggest laggards.

The final week of December has always been a slow trading week landing between Christmas and New Year's holidays as firms close their books for the 2010. But this year,

trading during the last week of the year was particularly light after the Christmas weekend blizzard shut down much of the U.S.'s East Coast for several days. Trading on the New York Stock Exchange on Monday was 467 million, roughly a third of its usual volume. At this point, traders are likely to refrain from major moves in the final three trading days of the year.

With no economic releases scheduled on Wednesday session, trading volumes remained weak. The NYSE saw volume of 519 million shares while 1.1 billion shares changed hands on the Nasdaq.

"In terms of volume, it's been a slow week although in terms of market action, it has been quite good with stocks hitting yearly highs nearly daily," said Peter Cardillo, chief market economist at Avalon Partners. "The enthusiasm for stocks has been continuing and it's looking like we'll finish the year at new or near-record highs."

Thursday's session will bring the year's final round of economic reports beginning with initial jobless claims, which are expected to dip slightly. The Chicago Purchasing Managers Index for December is also slated to show a slight decline, and November pending-home sales are forecast to slip 0.3% after the previous month's gain of 10.4%.

"I expect we'll enter the new year with a traditional January effect, which means the rally should continue until we head into a correction of about 10% in the latter part of the first quarter," Cardillo said, adding that he expects the rally to be lead by small to mid-cap stocks.

As part of its ongoing insider-trading investigation, the U.S. government brought securities-fraud charges against Winifred Jiau regarding information related to

Marvell Technology

(MRVL) - Get Report

and

Nvidia

(NVDA) - Get Report

.

On the corporate news front, shares of

Sears Holdings

(SHLD)

added 6.4% to $74.49 after the retailer said yesterday that it would sell movie downloads through its website.

BJ's Wholesale Club's

(BJ) - Get Report

stock gained 7.1% to $47.62 after the

New York Post

reported that buyout firm Leonard Green & Partners might attempt a hostile takeover of the bulk retailer.

Shares of

Noble Energy

(NBL) - Get Report

rose 2.6% to $87.16 after the company said its Leviathan field off the coast of Israel contains an estimated 16 trillion cubic feet, making it the

largest natural gas field in the company's history.

Savient Pharmaceuticals

(SVNT)

saw its stock lose 2.2% to $11.51 after the company said it

recently began searching for a new CEO. President Paul Hamelin has been leading the company since Christopher Clement resigned in November 2008.

Hong Kong's Hang Seng gained 1.5%, and Japan's Nikkei added 0.5%. The FTSE in London shed 0.2%, while the DAX in Frankfurt rose 0.3%.

--Written by Melinda Peer in New York

.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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