Consumer Data, Nortel's Outlook Lift Stocks

Trading was volatile in the last full session before Christmas.
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Updated from 3:33 p.m. EST

Stocks closed higher in the last full session before Christmas as relatively benign earnings news from

Nortel

(NT)

and signs the American consumer is bouncing back fueled buying. Trading was volatile on so-called "triple-witching" Friday as various quarterly options contracts expired.

The

Dow Jones Industrial Average rose 50 points, or 0.5%, at 10,035, while the

Nasdaq added 27 points, or 1.4%, to 1946. The

S&P 500 gained 5 points to 1145.

Tech shares perked up when Nortel predicted it would lose a pro-forma 16 cents a share in the fourth quarter, a slightly better result than analysts were predicting, although revenues will fall about $140 million below forecasts. The company also renegotiated a credit agreement. Nortel's shares gained 77 cents to $7.13.

Other networking and hardware names rose, including

Intel

(INTC) - Get Report

, up 50 cents to $32.41,

Ciena

(CIEN) - Get Report

, up 45 cents to $14.43,

Sycamore

(SCMR)

, up 36 cents to $4.89, and

Juniper

(JNPR) - Get Report

, up $1.05 to $20.01.

A report said consumer optimism rose to a four-month high in December. The University of Michigan consumer sentiment index came in at 88.8 for the month, up from 83.9 in November, reflecting fewer job cuts and lower oil prices. A separate report said consumer spending fell 0.7% in November after jumping 2.7% in October. The decline was less than expected.

The government also released its final revision of third-quarter GDP, boosting the rate of contraction to 1.3% from earlier estimates of 1.1% and 0.4%.

European stocks ended higher across the board with London's FTSE 100 gaining 1.6% to 5159 and Germany's Xetra DAX adding 1.7% to 5019. In Asia, Japan's Nikkei closed down about 1% to 10,335 while Hong Kong's Hang Seng lost 3.8% to 11,158.

Also lending support was an encouraging earnings report from

Nike

(NKE) - Get Report

, which said second-quarter earnings rose 8% on strong results in Europe and Asia. The sportswear giant earned 48 cents a share in the quarter, 2 cents higher than analysts' forecast, and predicted continued growth for the full year. Nike shares were up $2.51 to $56.30.

Western Digital

(WDC) - Get Report

, which predicted earnings of 4 cents a share for its fiscal second quarter, 3 cents higher than analysts' forecast. The company cited strong demand for its disk drives and said revenues would be $540 million to $550 million, up from previous guidance of $490 million to $520 million. The shares closed up 58 cents to $6.10.

Pfizer

(PFE) - Get Report

was slapped with a $43 million jury verdict in a suit over Rezulin, a diabetes medication made by its Warner-Lambert unit that was pulled from the market last year. Pfizer plans to appeal the order but its shares were off 40 cents at $41.

A report said

Citigroup

(C) - Get Report

is close to formalizing an offer to acquire the energy trading operations of bankrupt

Enron

(ENE)

. The

Wall Street Journal

said Citigroup's bid could become the so-called "stalking horse" offer that future bids are measured against.

Bonds were lower, with the 10-year Treasury note losing 15/32 to 99 10/32, yielding 5.09%.