Stocks move higher as Fed continues stimulus plan - Stocks, bond yields rise on retail sales, business confidence gains; Fed leaves stimulus alone

On Tuesday December 14, 2010, 3:01 pm

NEW YORK (AP) -- Stocks rose and bond prices fell sharply Tuesday after a handful of reports pointed to a stronger economy and the Federal Reserve said it would continue with its stimulus plan. The yield on the benchmark 10-year Treasury note rose to its highest level since May.

The Fed left interest rates alone after its one-day meeting but said it would keep up its $600 billion bond-buying program. The Fed said that while the economic recovery is continuing, it's proceeding "at a rate that has been insufficient to bring down unemployment."

Stock indexes rose early Tuesday after the Commerce Department reported that retail sales rose for the fifth straight month in November. Investors were also encouraged by a report that businesses in the U.S. increased their inventories for the 10th consecutive month, a sign they are feeling more confident about the economy.
Separately, a survey from the Business Roundtable, an association of CEOs of big U.S. companies, showed that 45 percent of executives say they expect their companies to add more workers over the next six months. That's the highest percentage since the survey began in late 2002.
"The economy is beginning to feel more stable than it has been," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.
The Dow Jones industrial average rose 70.95, or 0.6 percent, to 11,499.51 in afternoon trading.
The Standard and Poor's 500 index rose 4.8, or 0.4 percent, to 1,245.26. Financial and energy companies were the only two of the 10 groups in the index to fall. The Nasdaq composite index rose 9.41, or 0.4 percent, to 2,634.32.
Treasury prices continued to fall, pushing their yields higher. The yield on the 10-year Treasury note jumped to 3.46 percent, its highest level since May 17 and well above the 3.28 percent it traded at late Monday. The price of the note fell about $1.44 per $100 in face value. The yield on the 10-year note helps set interest rates on many kinds of loans including mortgages.
Bond yields have been rising steadily over the past two months as investors raise their expectations for economic growth and inflation. The 10-year yield was as low as 2.39 percent on Oct. 7.
In corporate news, Best Buy fell 15.5 percent to $35.25 after the retailer said its third-quarter net income fell more than expected as it lost sales of TVs and mobile devices to competitors. The company also cut its full-year outlook.
HCP Inc., a real estate investment trust that owns and operates health facilities, rose 3.1 percent to $33.53 after the company said it will buy all the real estate assets of HCR ManorCare for $6.1 billion in cash and stock. HCR runs more than 300 rehabilitation and nursing facilities.
The dollar fell 0.1 percent against an index of six other currencies.