U.S. Stocks Mostly Higher, With Holiday Sales In Play

NEW YORK (MarketWatch) -- U.S. stocks were mostly higher in light trade Friday, led by gains in energy shares as crude oil prices advanced, while retailers were in focus as post-Christmas sales kicked off in earnest.

Amazon.com Inc. said Friday that the 2008 holiday season "finished as its best ever," in spite of grim results across much of the overall retail sector.

However, an early survey of the retail sector pointed to a dismal Christmas shopping season.

"We're not getting good numbers on the retail side, but when the market shrugs off bad news, that's good news," said Paul Mendelsohn, chief investment strategist at Windham Financial Services.

"A lot of this bad news is already built into this market, and people are trying to find a light at the end of the tunnel," he said.

The Dow Jones Industrial Average rose 34 points to 8,502, with 17 of its 30 components gaining ground, led by the likes of Alcoa , Exxon Mobil and Coca Cola .

Shares of General Motors Corp. led the gains among blue chips, rising 13%.

Holders of bonds of GM's finance arm, GMAC, have a Friday deadline to swap $38 billion in debt for lower-valued bonds so the firm can become a bank holding company and be eligible for financing under the U.S. Treasury Department's $700 billion Troubled Asset Relief Program.

GMAC reportedly needs the approval of holders of 75% of the bonds to restructure the debt.

The S&P 500 rose 3.4 points to 868, while the Nasdaq Composite advanced 2.4 points to 1,522.

The energy sector led the gains on the S&P, rising 2%, as crude oil prices recovered some ground after sliding 33% this month.

With the end of the tax year approaching, a lot of selling over the past few weeks has affected some of the hardest-hit sectors of the market, such as financials and energy, so that investors can declare a loss on their positions, according to Mendelsohn.

Among other sectors, financials fell the hardest, off 0.6%, followed by technology, down 0.2%.

"To a large degree, [trading] action is driven by window-dressing and setting up positions for next year," Mendelsohn said.

"There has also been a lot of tax-loss selling over the past couple of weeks," he said. "As we get closer to the end of the year, people done with their tax loss selling may not want to remain short for too long in some sectors such as energy."

Year to date, the Dow industrials have lost 32%, the S&P 500 -- heavily weighed by financials -- is down 41%, and the Nasdaq Composite is down 42%.

Trading volumes were very light, with 196 million shares changing hands on the New York Stock Exchange and 918 million on the Nasdaq stock market. Advancing issues topped decliners by 17 to 11 on the NYSE, while they only fractionally topped decliners on the Nasdaq.

No holiday cheer for retail

Total retail sales dropped 5.5% to 8% for November and December, according to MasterCard Inc.'s SpendingPulse unit. The 40% drop in the price of gasoline compared to December 2007 accounts for almost half of the decline.

Excluding gasoline, total sales were down 2% to 4% this holiday season compared to the same period in 2007.

"A difficult economic environment combined with unfavorable weather during the last week of shopping made 2008 one of the most challenging holiday shopping seasons in decades," the survey said.

The U.S. dollar traded lower Friday, with evidence of poor retail sales serving as the focus for thin post-holiday trading. The dollar index , which measures the currency versus six major counterparts, fell 0.1% to 80.814. The euro rose 0.5% to $1.4088.

Treasurys were slightly higher Friday, with 10-year note yields falling on evidence of poor retail sales, serving as the focus amid thin post-holiday trading. Ten-year note yields fell 2 basis points to 2.18%.

Asian markets finished the session mixed, with gains forTokyo, but losses for China and South Korea.

Several markets in Asia were closed for a holiday, while U.K. and Europe markets were also closed on Friday. Japan reported a record slump in industrial production, the biggest since the government began collecting data in 1953.

On Wednesday, U.S. stocks finished higher after a shortened pre-holiday trading session, gaining ground as data on consumer spending and durable goods orders for November came in better than expected. The Dow gained 49 points, good enough for a 0.6% advance to 8,468, with 22 of its 30 components trading higher.

Markets were closed on Thursday.

By Nick Godt