Signs of spending push stocks up

NEW YORK – Encouraging news about how consumers feel about the economy and how much they’re spending sent stocks higher on Friday.

The strong showing in retail sales last month raised hopes that consumers are starting to feel more comfortable opening their wallets after months of building savings. The 1.3 percent increase was more than double the gain that analysts had forecast.

The government’s retail report came as a relief to many investors who have been frustrated that consumer spending, a mainstay of the U.S. economy, has remained in a funk even as other parts of the economy recover.

A separate report showing an increase in consumer confidence signaled that spending could continue to rise. The preliminary Reuters/University of Michigan consumer sentiment index increased more than expected in December.

In another welcome sign, the Commerce Department reported a 0.2 percent gain in business inventories in October, breaking a 13-month streak of declines. That’s a signal that businesses expect consumers to step up their purchases.

Hopes of an economic rebound have driven stocks sharply higher for nine months, but the advance has slowed in the past month as investors lock in the year’s huge returns and question what catalysts there might be to power the market higher next year.

Stephen Wood, chief market strategist at Russell Investments, said the day’s reports help confirm that the economy is on the right track.

The Dow Jones industrial average closed the week up 82.60, or 0.8 percent, at 10,471.50. The Standard & Poor’s 500 index rose 0.43, or less than 0.1 percent, to 1,106.41. The Nasdaq composite index fell 4.04, or 0.2 percent, to 2,190.31.

The Russell 2000 index, which tracks the performance of small company stocks, fell 2.42, or 0.4 percent, for the week to 600.37.

The Dow Jones U.S. Total Stock Market Index – which measures nearly all U.S.-based companies – ended at 11,239.01, up 7.81, or 0.1 percent.