Stocks Take a Joy Ride With Upbeat Consumer

The Nasdaq jumps 58 points, and the Dow gains 196 as the Conference Board consumer confidence index surges. An Apple upgrade helps, too. Frank Curzio reviews the day in The Real Story video (above).
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Updated from 4:25 p.m. EDT

The major indices in New York marched ahead after the long weekend as investors were energized by consumer confidence data and an

Apple

(AAPL) - Get Report

upgrade.

The

Dow Jones Industrial Average

was up 196.17 points, or 2.4%, at 8473.49, while the

S&P 500

was higher by 23.33 points, or 2.6%, at 910.33. The

Nasdaq

fared the best, up 58.42 points, or 3.5% at 1750.43.

General Motors

(GM) - Get Report

shares settled up one penny at $1.44 after falling as much as 12% earlier as it races to get

the final pieces

in place before a predetermined deadline that if unmet would result in a bankruptcy filing.

The United Auto Workers reportedly has agreed to a deal that will lead to the union owning 17.5% of the company and receiving $6.5 billion of preferred shares and a $2.5 billion note to fund a trust that will take over retiree health care costs starting next year, according to media reports.

GM bondholders, meanwhile, have until midnight to decide whether to agree to give up $27 billion in debt for a collective 10% stake in the restructured company.

Reuters

reported at midday that bondholders had tendered only a low-single digit percentage of the total debt available, however.

Stocks opened lower on concerns about North Korea missile firings and dim data on home prices, but reversed course as investors derived more optimism from the Conference Board consumer confidence index.

The

consumer confidence index

increased unexpectedly to 54.9 in May, from 40.8 in April. The move represents the biggest gain in six years and brings it to its highest level in eight months.

"This is a healthy rise that we haven't seen in many years," says Peter Cardillo, chief market economist at Avalon Partners. "Consumers are concurring with what the stock market has been indicating, which is that we're on our way to recovery."

But while the idea that thing are "less bad" is what has brought markets to their current point, "to move significantly further, investors will demand evidence that suggests the recovery is moving toward a self-reinforcing condition," writes Tony Crescenzi, chief bond strategist at Miller Tabak on his

RealMoney.com

blog. "This will take time."

Investors were quick to give warm reception to an

upgrade to Apple

, however, sending shares 6.8% higher to $130.78 after Morgan Stanley raised its rating for the stock to overweight.

At the same time, Friedman Billings Ramsey upgraded

Bank of America

(BAC) - Get Report

to market perform

from underperform and said it now expects

American Express

(AXP) - Get Report

to post a profit in 2009.

Bank of America gave up 0.8% to $10.98, but American Express gained 5% to $24.57, and the KBW Bank Index was higher by 4%. Also

Deutsche Bank

(DB) - Get Report

rose 4.1% to $68.09 after CEO Josef Ackermann said that the bank has had a good start to the second quarter.

Stocks were lower ahead of the open after news that North Korea fired two short-range missiles after testing a nuclear bomb on Monday, putting an exclamation point on tensions with the United Nations.

An early domestic economic indicator did little to instill confidence. The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 19.1% decline in the first quarter of 2009 vs. 2008, the largest decline in the 21-year history of the series.

If there was a silver lining, the 10-city and 20-city composites declined 18.6% and 18.7%, respectively, year over year --the second month since October 2007 when they didn't post a record decline.

"Based on the March data, however, we see no evidence that a recovery in home prices has begun," said Blitzer in the release. He added in an interview with

CNBC

that, "the damage, if anything, seems to be spreading out."

On a brighter note, though, the Chicago Fed National Activity Index was improved to -2.06 in April, up from -3.36 in March, and the Federal Reserve Bank of Dallas said the Texas general business activity index bettered to -21.5 from -31.6.

The dollar was recently stronger against the pound and yen and flat vs. the euro. Longer-dated Treasuries were falling, with the 10-year down 23/32, yielding 3.54%, and the 30-year falling 1-20/32, to yield 4.48%.

The U.S. sold $40 billion in two-year notes in an auction on Tuesday with what Miller Tabak's Crescenzi describes as "very good" results. But he says, "It is important to keep in mind that the 2-year note has special appeal in a zero interest rate environment that tomorrow's 5-year and Thursday's 7-year do not."

Crude oil rose 78 cents to settle at $62.45 a barrel, while gold was down $7.20 to $953.30 an ounce.

Stocks overseas were mixed. In Europe, the FTSE 100 in London and the Dax in Frankfurt were recently up 1.1% and 1.4%, respectively. In Asia, Japan's Nikkei and Hang Seng's Hong Kong lost 0.4% and 0.8%, respectively.