Stocks closed higher Friday, helped by encouraging economic news and progress on a compromise in Washington to extend the Bush-era tax cuts.

The blue-chip Dow Jones Industrial Average ($INDU) gained 40 points, or 0.4%, to close at 11,410. The broader S&P 500 ($INX) rose 7 points, or 0.6%, to 1,240. The tech-heavy Nasdaq Composite ($COMX) added 21, or 0.8%, to finish at 2,638.

A surprise jump in consumer sentiment to a six-month high helped stocks post further gains Friday. Consumer sentiment unexpectedly jumped 2.6 points to 74.2 in December, while the current economic conditions component rose to its highest level in about three years, according to the Thomson Reuters/University of Michigan survey.

Economists surveyed by Bloomberg forecast sentiment to rise to 72 in December from 71.6 in November. The index was 67.7 in October and 68.2 in September. At the start of the recent recession in December 2007, it was 88.9.

Also helping equities was a surprise drop in the trade deficit. A jump in exports and a dip in imports helped the U.S. trade deficit to unexpectedly plunge 13.2% in October to $38.7 billion -- the lowest level since January, the U.S. Commerce Department said Friday. Economists surveyed by Bloomberg, on average, expected the trade deficit to remain unchanged in October at $44.0 billion, after a revised $2.3 billion drop to $44.6 billion in September.

The S&P 500 is up more than 11% on the year and sits at a level not seen in more than two years. And yet the huge selloff in the bond market this week and the suddenly resurgent dollar failed to weigh on equities, says Kenny Polcari, managing director at interdealer broker ICAP Corporates.

"Bonds are getting crushed, the dollar's going up," Polcari says. "You would have thought that the market would have pulled back a little bit." But the Federal Reserve's second round of quantitative easing appears to be working -- at least when it comes to reflating assets like stocks and commodities, he says.

For Polcari's view from the floor of the New York Stock Exchange (NYX), see the video above.

Increase your money and finance knowledge from home

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Small Cap Investing

Learn now to invest in small companies the right way.

View Course »

Add a Comment

*0 / 3000 Character Maximum

17 Comments

Filter by:
procompdynamics

Smoke and mirrors, the big wigs on wall street are making as much ptofit as possible, while the rest of us go down the toilet. when it all blows up they will have enough to ride out the impending collapse.

December 11 2010 at 9:38 AM Report abuse rate up rate down Reply
kv37

happy days are here again...the sun is shining blah blah blah

December 11 2010 at 4:40 AM Report abuse +1 rate up rate down Reply
Bill

Market ends week at more than two year high. Isn't that almost the same as ending the week at a two year high.

December 11 2010 at 3:51 AM Report abuse +1 rate up rate down Reply
ultraz2

FED action to drop 30 year mortgage intrest rates to 2 percent, in an attempt to restimulate the housing market and the US economy as a whole.

December 11 2010 at 12:23 AM Report abuse +2 rate up rate down Reply
Robert & Lisa

I smell a George Soros rat, Obama and thugs will strike again...

December 10 2010 at 10:56 PM Report abuse +1 rate up rate down Reply
Sonny

I hope the Wallstreeter's enjoy their time in the sun..............because soon the bottom will fall out and no more fuc*ing bailouts.

December 10 2010 at 10:53 PM Report abuse +5 rate up rate down Reply
hi cat

I surveyed local businesses in my locale eg. seafood retailer, department stores, shoe stores, etc. Merchants are suffering. One guy said he is lucky he has no rent or mortgage because he owns the building. Friends he knows are going down; they can't afford the overhead, the receipts are not there. The businesses are cutting prices and giving two/fer to entice customers. Forget the lies in the media. Remember when uncle Ben and cousin Barnie Frankfurter sat in front of the congressional committee and told us the sub prime crisis was contained, no threat to the rest of the economy? The result? We got blood in the streets and theoretically the time to load up on stocks was march 2009. The market looks pretty good NOW and I feel I missed the comeback. But that little voice inside haunts me it says : they were lying then and they are lying now.

December 10 2010 at 8:08 PM Report abuse +5 rate up rate down Reply
BABIN

Many Consumers just use CREDT CARD and because right now persomnal Debt for U.S. Consumers hit around $2,4 Trillion not included house market this amount will never be pay off , you can count all this spending for Economy but if you count CREDIT CARD spending with regular pay with debit card or cash this is not real spending because CREDIT CARD spending is not pay off end of month, just pull out all spending numbers who use CREDIT CARD and let see how much is for real U.S.Consumer spending...

December 10 2010 at 7:27 PM Report abuse +3 rate up rate down Reply
1 reply to BABIN's comment
prognesub

I wonder how many $Billions the banks are going to write off in bad credit card debt after the first of the year ? Who gets to have their debts excused ? My bets are on Wealthy card holders with huge balances. You know the little people owe them a whole lot. Who else can invest vast sums in Asia and cost you your job.

December 10 2010 at 8:07 PM Report abuse +2 rate up rate down Reply
prognesub

Thanks to the Fed you fools.

December 10 2010 at 7:14 PM Report abuse +2 rate up rate down Reply
jbluhm1951

Oh, by the way, I do not work for Lowes.

December 10 2010 at 7:03 PM Report abuse rate up rate down Reply