Stocks Rediscover Holiday Cheer

An Amazon upgrade and a surge in consumer confidence bring out the buyers.
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Updated from 3:20 p.m. EST

Stocks stormed to new 3 1/2-year highs Tuesday, driven by an upgrade of

Amazon.com

(AMZN) - Get Report

and a surge in a key barometer of consumer confidence.

The

Dow Jones Industrial Average

rose 78 points, or 0.7%, to 10,854, the

S&P 500

added almost 9 points, or 0.7%, to 1213, while the

Nasdaq

was up 23 points, or 1.1%, to 2177.

The 10-year Treasury note was up 2/32 in price to yield 4.29%, while the dollar continued to slide against the yen and, for the fourth straight trading day, hit a new low against the euro.

"It's quiet and we've only had the consumer confidence as news," said Bryan Piskorowski, market analyst with Wachovia Securities. "It's a tough week, given the fact that there's not a lot of data. By and large, it's a quiet session."

Oil closed higher after a five-day slide amid a spike in heating oil production and predictions for a mild winter in the U.S. In Nymex trading, crude futures for February delivery gained 45 cents to $41.77 a barrel.

In economic news, the Conference Board said its consumer confidence index surged to 102.3 in December, after a 90.5 reading in November. Economists expected a reading of 94.0. It was the highest reading since July of this year, and the first increase after four consecutive monthly declines.

"The consumer confidence data bode well for consumer spending," said Peter Cardillo, chief market analyst with S.W. Bach & Co. "It tells us that consumer spending should do well for the first and second quarter. We should hopefully see sustained growth into the first half of the year."

The death toll continues to climb in Sunday's south Asia tidal wave. Aid agencies currently estimate the number who perished at more than 50,000 and say that figure is likely to rise in coming days as rescue workers continue to search for the missing.

Taylor Devices

(TAYD) - Get Report

shares rose 172% to $6.25 Monday in anticipation of demand for the company's earthquake protection technology. The North Towanda, N.Y.-based company makes viscous dampers that protect bridges, buildings and towers by absorbing shockwaves from an earthquake. Taylor was recently up only 7 cents, or 1%, to $6.82, after spending most of the day up 23%.

In corporate news, the Office of Federal Housing Enterprise Oversight is reviewing a huge severance package for two departing executives detailed Monday night by

Fannie Mae

(FNM)

. The compensation, outlined in a federal filing, could raise more questions about corporate governance amid the mortgage giant's accounting scandal.

Fannie said outgoing CEO Franklin Raines is set to receive a package that includes $8.7 million in deferred compensation, $6 million in stock options, $5 million in incentive stock and a retirement benefit of $1.4 million a year. Timothy Howard, the resigned CFO, is slated to get $4.4 million in options, another $4 million in deferred compensation and a yearly benefit of $433,000. Fannie Mae was recently up 14 cents, or 0.2%, to $69.86.

Electronic retailer Amazon, which bucked Monday's market downtrend and rose 8%, was upgraded to outperform from peer perform and had its price target raised Tuesday morning at Bear Stearns. "We continue to believe in the long-term value of Amazon and think that the ultimate revenue potential for the company has only begun to be tapped," Bear wrote.

Amazon rose $2.54, or 6%, to $44.79, and

Google

(GOOG) - Get Report

was also gaining, up 68 cents, or 0.3%, to $192.59.

Elsewhere,

Tyco

(TYC)

could see buyer interest after J.P. Morgan raised its price target to $40 and predicted better-than-expected growth in earnings and free cash flow. Shares were gaining 20 cents, or 0.5%, to $36.21.

Swift Transportation

(SWFT)

said it expects to beat the range of analysts' earnings estimates of 27 cents to 40 cents a share. The Thomson First Call consensus is for 33 cents a share. Swift was recently up 58 cents, or 2.7%, to $21.67.

Blockbuster

(BBI) - Get Report

said it would take its takeover offer for

Hollywood Entertainment

(HLYW)

directly to its shareholders and start a cash tender offer by mid-January unless Hollywood's board starts to cooperate. Blockbuster is offering $11.50 in cash for each share of Hollywood, worth about $1 billion, including debt assumption. Blockbuster was recently down 9 cents, or 1%, to $9.30. Hollywood was recently up 6 cents, or 0.4%, to $13.15, higher than Blockbuster's offer.

United Health Services

(UHS) - Get Report

lowered its 2004 earnings outlook to a range of $2.75 to $2.85 a share because of lower admissions to its acute-care hospitals. Shares were recently off $1.29, or 2.8%, to $44.40.

Overseas markets were mostly higher, with Germany's Xetra DAX adding 0.5% to 4255 while British markets were closed for a holiday. In Asia, Japan's Nikkei rose 0.5% overnight to 11,424, while Hong Kong's Hang Seng was virtually unchanged at 14,197.