NEW YORK (CNN/Money) -
Stocks surged Tuesday as investors used a strong reading on consumer confidence as a reason to get back in on the traditional year-end rally.
"What I like about today is that all of the main S&P sectors are higher, which shows broad strength for the market," said Barry Hyman, market strategist at Ehrenkrantz King Nussbaum. "And the consumer confidence number suggests optimism about the start of 2005."
Stocks slumped Monday, weighed down by a plunging dollar, but bounced back Tuesday after the stronger-than-expected confidence reading and some decent corporate news.
The Dow Jones industrial average (up 78.41 to 10,854.54, Charts) rose 0.7 percent, closing at its highest level since June 13, 2001.
The broader Standard & Poor's 500 (up 8.62 to 1,213.54, Charts) index also added 0.7 percent, bringing it to best close since Aug. 3, 2001.
The Nasdaq composite (up 22.97 to 2,177.19, Charts) rose about 1.1 percent, ending at its highest level since June 11, 2001.
Buying was broad based, with 29 out of 30 Dow stocks closing higher.
The declines Monday were modest and seemed to be just a blip in what has been an otherwise solid quarter for stocks.
With the exception of the Nasdaq, which hit a new 3-1/2 year high Tuesday for the first time since February, the major gauges have been at or near such lofty heights for the better part of a month. The market has have been climbing higher since mid-October.
After a rangebound first nine months of the year -- which analysts say was a consolidation after 2003's rally -- stocks have been on a tear since mid-October, when uncertainty about the presidential election began to wane, and oil prices peaked.
Although there had been some worry that the usual year-end came early this year, "I think the market is going to adhere to tradition," Hyman said, "and we'll probably see the market continue to move up through the end of the week."
The time of year certainly supports such an advance. The last five trading days of the year and the first two of the new year have yielded an average 1.7 percent gain for the S&P 500 since 1969, according to the Stock Trader's Almanac.
"I think today is a day of portfolio window dressing, with asset managers making sure they don't have cash sitting around for the end of the year, which tends to be favorable for stocks," said Timothy Ghriskey, chief investment officer at Solaris Asset Management.
"I think you'll continue to see that through the end of the year," he added.
Wednesday's lone economic report is on existing home sales in November. Sales are expected to hold steady at a 6.75 million unit annual rate, according to Briefing.com estimates, unchanged from October levels.
On the move
Among stock movers, Dow component Pfizer (up $0.44 to $26.94, Research) gained 1.6 percent after the company said it has received regulatory approval to market its anti-fungus medicine Vfend, for the treatment of blood infections.
The stock has been under pressure of late, due to safety concerns about its blockbuster painkiller Celebrex.
Other blue chip gainers included Caterpillar (up $2.37 to $98.47, Research) and Honeywell (up $0.36 to $36.07, Research).
Amazon.com (up $2.38 to $44.63, Research) rallied for a second day after Bear Stearns upgraded it to "outperform" from "peer perform." The No. 1 Internet retailer jumped 5.6 percent, after rising about 8.5 percent Monday, and its stock was one of the most active on Nasdaq.
For the second session in a row, companies that make products or devices for tracking earthquakes rallied, following the weekend disaster in South and Southeast Asia.
Taylor Devices (down $0.48 to $6.27, Research), Euro Tech Holdings (up $1.88 to $6.25, Research) and Strategic Diagnostics (up $0.58 to $4.00, Research) were among the gainers.
Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by better than 2-to-1 on volume of about 981 million shares. On the Nasdaq, winners beat losers by a similar margin on volume of nearly 1.58 billion shares.
The December consumer confidence report also gave the market a lift.
Released around 30 minutes after the start of trading, the index from the Conference Board came in at 102.3, versus an upwardly revised 92.6 last month. Economists surveyed by Briefing.com expected the confidence measure to rise to 94.
The dollar halted its recent slide and hovered just above Monday's all-time low versus the euro, and inched higher versus the yen.
Treasury prices recovered from morning losses, ending the session little changed. The yield on the 10-year stood at 4.29 percent, unchanged from late Monday. Bond prices and yields move in opposite directions.
U.S. light crude for February delivery gained 45 cents to settle at $41.77 a barrel on the New York Mercantile Exchange.
COMEX gold fell 90 cents to settle at $445.30 an ounce.
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