Stocks Make Small Gains

Stocks ended modestly higher Wednesday as a jump in consumer confidence helped allay worries about the economy.

In the Treasury bond market, longer-term yields edged up after falling below shorter-term yields Tuesday, a relatively rare occurrence that historically has signaled a weaker economy ahead.

On Wall Street, the Dow Jones industrial average added 18.49 points, or 0.2%, to 10,796.26, recouping just a slice of its 105-point drop Tuesday.

Broader indexes also scored small gains. The Standard & Poor’s 500 was up 1.63 points, or 0.1%, to 1,258.17; the Nasdaq composite added 2.05 points, or 0.1%, to 2,228.94.

Winners topped losers by about 7 to 4 on the New York Stock Exchange, where trading volume remained subdued as the year winds down.

The Conference Board’s report that consumer confidence rose this month boosted optimism about the economy.

“Our economy is stronger than people have been talking about all year long,” said James Huguet, who oversees $1.1 billion at money manager Great Companies in Clearwater, Fla.

Stocks took a hit Tuesday after interest rates in the Treasury bond market “inverted” -- meaning that the yield on six-month T-bills, at 4.35% on Tuesday, was above the yield on 10-year T-notes, at 4.34%.

Normally, long-term bonds pay more than short-term securities. When the reverse has happened in recent decades, it often has been a sign that bond investors expected the economy to slow significantly soon and pull all interest rates down.

On Wednesday the 10-year T-note rose to 4.37% while the six-month T-bill fell to 4.32%.

“If it stays inverted, I would be somewhat concerned” about the economy, said Eddie Allen, a money manager at Eagle Global Advisors in Houston.

Many investment pros, however, say they don’t believe that a rate inversion would foretell economic trouble.

“I wouldn’t extract an economic decline out of this,” said Daniel Fuss, vice chairman of Loomis Sayles & Co. in Boston. “The level of rates is just not high enough right now to do real damage to the economy.”

The stock market held up well Wednesday in the face of another jump in crude oil prices after Iran said the Organization of the Petroleum Exporting Countries should cut production to keep prices between $50 and $60 a barrel. Near-term crude futures in New York jumped $1.66 to $59.82 a barrel.

With two trading sessions to go this year, the Dow is up 0.1% year to date, the S&P; 500 is up 3.8% and the Nasdaq composite is up 2.5%. The average NYSE stock is up 7.5%.

Among the day’s highlights:

* Rebounding energy stocks help lift blue-chip indexes. Transocean gained $1.45 to $70.21, Chevron rose 81 cents to $56.70 and Kerr McGee rallied $1.83 to $91.04.

* Many retail stocks gained as investors felt better about holiday sales. J.C. Penney jumped $1.01 to $56.31, American Eagle Outfitters rose 95 cents to $22.95 and Guitar Center rallied $1.03 to $51.20.

* Some investors continued to pile into the year’s big winners, including copper miner Phelps Dodge, which rose $2.35 to a record $147.65. The stock is up 49% this year.

Also, Whole Foods Markets surged $3.67 to a record $79.10. S&P; said it would add the grocery-chain stock to the S&P; 500 index. Whole Foods shares split 2 for 1 on Wednesday.

* On the downside, some of the year’s biggest losers fell further. General Motors lost 38 cents to $18.61, its lowest since 1982.

Verizon Communications slipped 19 cents to $30.25. The shares have fallen 25% this year.

* Gold continued to rebound, with near-term futures rallying $6.20 to $514.20 an ounce in New York. Among gold miners, Glamis Gold jumped $1.29 to $27.26.

* Japan’s market remained on a hot streak. The Nikkei-225 index rose 1.4% to a five-year high of 16,194.61. It is up 41% this year.