Consumer Confidence Index Lifts Wall Street

Stocks on Tuesday resumed their year-end rally, lifting key indexes to fresh three-year highs, after a measure of consumer optimism climbed to its best level since July.

The Conference Board’s consumer confidence index rose to 102.3 this month from 92.6 in November. Wall Street had expected a reading of 94. In a trading week that traditionally carries little news, the better-than-expected number had an influence on trading that was stronger than usual.

The market is “ending the year on a significant uptrend and this bodes well for the new year,� said Bob O’Brien, head of trading at Evergreen Investment Management. Consumer confidence “was a blowout number. It could start the new year on a very good foot.�

The Dow Jones industrial average rose 78.41 points, or 0.7%, to 10,854.54. It was the best close for the Dow since June 13, 2001.

The broader market also scored strong gains. The Standard & Poor’s 500 was up 8.62 points, or 0.7%, to 1,213.54, its highest close since Aug. 3, 2001. The Nasdaq composite jumped 22.97 points, or 1.1%, to 2,177.19, its best finish since June 8, 2001.

Winners outnumbered losers by nearly 3 to 1 on the New York Stock Exchange, though trading volume remained muted.

Stocks had dipped Monday, partly on worries about the economic effect of the Asian earthquake disaster. But “the financial impact on the global economy and the U.S. economy is likely to be minimal,� said James Wong, senior equity strategist at Payden & Rygel Investment Management.

As for Tuesday, the consumer confidence numbers showed “the consumer is still very much in the ballgame when it comes to driving the economy,� Wong said.

In other market highlights:

* Heavy-industry stocks, stars for much of this year, attracted more buyers. Shares hitting record highs included Caterpillar, up $2.37 to $98.47; Cummins, up $1.85 to $84.42; and Eaton, up $1.37 to $72.35.

* Some Internet-related issues rallied on optimism about year-end retail sales. Ipayment rocketed $6.56 to $50.29 and EBay jumped $3.30 to $116.16.

* Some companies that sell quake warning and disaster relief gear gained. Sutron, which provides tide-monitoring equipment that’s part of the tsunami-warning network in the Pacific Ocean, jumped $1.67 to $10.17. Benthos, which sells underwater microphones, added $1.81 to $17.30. Euro Tech Holdings, a distributor of water treatment equipment, surged $1.88 to $6.25.

* Major drug stocks continued to rebound. Pfizer added 44 cents to $26.94. Its shares have gained for five straight days since concern that its Celebrex and Bextra medicines increased the risk of heart ailments sent the stock to a seven-year low.

Pfizer shares have “been hit too much,� said Ned Riley of State Street Global Advisors. Merck, which withdrew its Vioxx painkiller for similar reasons, advanced 25 cents to $32.20.

* Biotech stocks were hot. Biogen Idec soared $2.31 to $67.86, Amgen jumped $1.01 to $64.60 and Genentech gained $1.61 to $55.30.

* Crude oil rebounded slightly, after Monday’s 6% price drop on forecasts of warmer weather in the East. Near-term futures climbed 45 cents to $41.77 a barrel in New York.

* The dollar was mixed. The euro eased slightly, to $1.361 from a record $1.362 on Monday. U.S. Treasury yields, meanwhile, were little changed. The yield on the benchmark 10-year note was unchanged at 4.29%.