Stocks push higher in light trading

NEW YORK (CNNMoney.com) -- Stocks rose for a third day Tuesday, with the Dow and S&P 500 ending just below 14-month highs, after two economic reports continued to fuel optimism about the economy in a thin trading session.

The Dow Jones industrial average (INDU) gained 51 points, or 0.5%. The S&P 500 index (SPX) rose 4 points, or 0.3%. Both gauges are near their highest levels since October 2008. The S&P 500 briefly traded above its 14-month high during the session.

The Nasdaq composite (COMP), advanced 12 points, or 0.5%, to close at its highest level since September 2008.

Oil recovered from earlier losses to close above $74. Gold continued to fall as the dollar firmed against rival currencies. Bond prices rose.

Stocks opened on an upbeat note after a government report showed the economy grew in the third quarter, although at a more tepid pace than forecast. The advance gained steam after an industry report showed sales of existing homes rose in November to the highest level in three years. But stocks settled into a narrow range during the afternoon amid a lack of market moving news.

"There's not a whole lot to trade off of today," said Nick Kalivas, vice president of financial research at MF Global Research in Chicago. "We're winding down for the year."

Wall Street has been in a holding pattern recently as investors look to protect gains accumulated over the last several months. The market has rallied broadly since March as a flood of government stimulus has helped the economy emerge from one of the deepest recessions on record.

For the year, the major indexes are all on track to post double-digit percentage gains. The Dow has gained nearly 19% so far this year, while the S&P 500 is up about 23% year to date. The Nasdaq has been the best performer of the year, climbing about 42%.

Analysts said the tone should remain subdued for the rest of the holiday-shortened week. The stock market will close early Thursday and remain dark Friday for the Christmas holiday.

"Most of the professional traders are done for the year," said Dan Cook, senior market analyst at IG Markets. "The guys who are left on the floor are executing client trades, which are mostly short-term trades."

Still, the lack of participation could make for some volatile moves, since low trading volumes tend to exaggerate swings in the market.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by about three to one on volume of 603 million shares. On the Nasdaq, advancers topped decliners by two to one on volume of 1.3 billion shares

Economy: The National Association of Realtors said sales of existing homes rose 7.4% in November to an annual rate of 6.54 million units, driven largely by government subsidies. Economists surveyed by Briefing.com expected the annual sales rate to rise to 6.25 million units.

The increase in home sales helped boost optimism that the economy is headed for a strong recovery next year. But analysts were quick to point out that sales have been supported by government subsidies, including an $8,000 tax credit and the Federal Reserve's $1.25 trillion mortgage asset purchasing program.

"Certainly the number is constructive for the market," Kalivas said. "The question is: How will the housing market look when Fed winds down its mortgage program and homebuyers credit fades away?"

Earlier, the Commerce Department released its final revision of third-quarter gross domestic product, the broadest measure of economic activity. The government said that GDP rose 2.2% in the three months ended in September.

That was less than the 2.7% gain projected by economists surveyed by Briefing.com. The final GDP figure was also below the 3.5% growth rate the government first reported in October. Nonetheless, it was still a marked improvement over the previous four quarters in which economic activity shrank.

"I don't think the GDP number was so unexpected by most market watchers," said Abigail Doolittle, a portfolio manager at Johnson Illington Advisors. "People are pleased by the fact that it remains up."

Company news: Boeing (BA, Fortune 500) rose 1.5% after the plane maker increased its stake in Global Aeronautical LLC to bring more of the 787 Dreamliner's operations under its direct control.

Ford Motor (F, Fortune 500) announced Monday that it is offering buyouts and early retirement to its 41,000 U.S. factory workers. The carmaker is looking to cut payroll costs in its effort to return to profitability by 2011.

World markets: Stocks in Asia closed higher, with Tokyo's Nikkei index up 1.9%. European markets closed higher.

Bonds. Treasury prices fell, with the yield on the benchmark 10-year note rising to 3.74%. Bond prices and yields move in opposite directions.

Money and oil: The dollar eased against the euro and the UK pound, but gained versus the yen.

Crude oil for February delivery rose 68 cents to settle at $74.40 a barrel.

Gold for February delivery dropped $9.30 to settle at $1,086.70 an ounce.