Stocks rise despite dreary holiday sales

Stocks advanced moderately in light post-Christmas trading Friday after the government threw a lifeline to an auto giant’s financing arm, but gains were limited by dreary holiday shopping readings.

The major indexes finished the week with losses, but the market nonetheless continued to show signs of stability.

The news from the retailing sector was unsurprisingly downbeat. Americans spent much less on gifts this season than they did last year, according to SpendingPulse, a division of MasterCard Advisors. Retail sales from Nov. 1 to Wednesday dropped 5.5% to 8% from a year earlier, the data showed, or 2% to 4% after stripping out auto and gasoline sales.

It was widely expected that this holiday season would be dismal, and analysts believe that a great deal of the poor economic news of late, including weak holiday spending, has been factored into stock prices.

Still, personal consumption accounts for more than two-thirds of U.S. economic activity, so Wall Street remains concerned that a more frugal consumer could keep the economy weak in 2009.

The stock market, which was closed for Christmas on Thursday, got a boost from the Federal Reserve’s announcement late Wednesday that it had allowed GMAC Financial Services -- the finance arm of struggling General Motors -- to become a bank holding company and thus qualify for money from the government’s $700-billion rescue fund. Analysts had said that without financial help, GMAC might have had to file for bankruptcy protection or shut down.

The Dow Jones industrial average climbed 47.07 points, or 0.6%, to 8,515.55.

Broader stock indicators also were up. The Standard & Poor’s 500 index advanced 4.65 points, or 0.5%, to 872.80, and the Nasdaq composite index rose 5.34 points, or 0.4%, to 1,530.24.

The Russell 2,000 index of smaller companies jumped 1.3%.

Advancing issues outnumbered decliners on the New York Stock Exchange by about 3 to 1. Volume was light.

For the week, the Dow ended down 0.7%, the S&P; 500 fell 1.7% and the Nasdaq lost 2.2%.

The Dow is down 36% for the year, while the S&P; 500 is down 41% and the Nasdaq is off 42%.

Since peaking in October 2007, the Dow has lost 40%, the S&P; 500 is down 44% and the Nasdaq has skidded 47%.

Trading is likely to stay light next week as many investors remain on vacation for the holidays.

On Friday, the dollar was down against other major currencies, while gold prices surged.

Yields on government bonds slipped. The three-month Treasury bill fell to 0.01% from 0.02% late Wednesday, and the 10-year T-note fell to 2.13% from 2.18%.

Oil prices snapped a nine-day losing streak prompted by gloomy economic reports and growing stockpiles of unused gasoline. Crude futures jumped $2.36 to settle at $37.71 a barrel on the New York Mercantile Exchange.

In the credit markets, notes issued by GMAC nearly doubled in price on the news of the Fed’s decision. But analysts said there was still much to be resolved about the company’s finances.

GM’s shares rose 41 cents to $3.66.

Overseas, Japan’s key stock index rose 1.6%. Many other major stock markets were closed for an extended holiday break.