NEW YORK -- U.S. stocks rose Thursday as upbeat retail sales and other U.S. data pointed to a strengthening U.S. economy and lifted optimism about consumer spending.
Indexes ended well off their highs for the day, however, paring gains late in the session as Brent oil settled down 0.9 percent, putting a lid on energy shares, and as worries increased about a possible U.S. government shutdown.
The gains come after the S&P 500 shed 2.4 percent over the previous three sessions, the worst run for the benchmark index in two months, as weak oil prices weighed down the energy sector.
Still, lower oil prices likely encouraged consumer holiday spending, and November retail sales beat expectations. Retailers were among the day's biggest percentage gainers on the S&P 500, including Urban Outfitters, up 7.6 percent at $32.29. The S&P retail index jumped 1 percent.
"It suggests overall spending is going to do well," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. He said a year-end rally could take the S&P to about 2,100.
Other economic data showed a strengthening labor market, as weekly initial jobless claims dipped by 3,000 to an adjusted 294,000, while the drop in oil prices helped spur the biggest decline in U.S. import prices in 2½ years.
The Dow Jones industrial average (^DJI) rose 63.19 points, or 0.36 percent, to 17,596.34, the Standard & Poor's 500 index (^GPSC) gained 9.19 points, or 0.45 percent, to 2,035.33 and the Nasdaq composite (^IXIC) added 24.14 points, or 0.52 percent, to 4,708.16.
The fate of a $1.1 trillion U.S. spending bill was put in doubt by Democratic objections over a provision to roll back part of the Dodd-Frank financial reform law. Current spending authority for federal agencies expires at midnight.
Worries Over Shutdown
Investors are still "a bit worried about a government shutdown," said Bruce Zaro, chief technical strategist, Bolton Global Asset Management in Boston.
The S&P energy sector, which has been hammered by the recent slide in oil prices, pared gains late in the session to close flat as oil prices fell further.
Brent crude, down more than 40 percent from its June high, settled down 0.9 percent at $63.68 a barrel.
Staples (SPLS) jumped 8.7 percent to $16.10 and Office Depot (ODP) climbed 12.1 percent to $7.54 after activist investor Starboard Value disclosed stakes in both office-supply retailers.
About 7.2 billion shares changed hands on U.S. exchanges, above the 6.9 billion average for the last five sessions, according to BATS Global Markets.
NYSE advancers outnumbered decliners 1,787 to 1,295, for a 1.38-to-1 ratio; on the Nasdaq, 1,668 issues rose and 1,089 fell, for a 1.53-to-1 ratio.
The S&P 500 posted 36 new 52-week highs and 15 lows; the Nasdaq composite recorded 91 new highs and 93 lows.
What to watch Friday:
The Labor Department releases the Producer Price Index for November at 8:30 a.m. Eastern time.
The University of Michigan releases its initial survey of Consumer Sentiment at 9:55 a.m.
11 Crucial End-of-Year Financial Tips
Market Wrap: Wall Street Bounces Back After 3-Day Slump
If you don't already have one, now's the time to establish a traditional individual retirement account or a Roth IRA, and if you're self-employed, a Solo 401K or SEP-IRA. Don't worry if you don't have enough money to fully fund the account. As long as you establish the account by the end of the calendar year, you'll be able to retroactively contribute to it through April 15 of next year, and those funds can still count toward your 2014 taxes.
For 2014, you're allowed to contribute up to $17,500 to your 401(k). (If you're 50 and over, that limit increases to $23,000.) This is the maximum you're able to save per year and still defer paying income tax on that money.
Since 401(k) contributions must be made through payroll deductions, talk to your company's payroll department about adjusting your December contribution or adding a lump-sum amount from your holiday bonus when you receive it. Also, chat with your human resource department to see if it will let you retroactively earmark contributions made prior to April 15, 2015 for the 2014 tax year.
If you're age 70½ or older, you're required to take a certain amount from your 401(k) and traditional IRA each calendar year. If you don't, you could be facing sizable penalty fees from the IRS (as in 50 percent of the amount you should have taken out). To find out how much you should take out by the end of the year, talk to your financial adviser or see this calculator.
You may qualify for a state income tax deduction by contributing to your children's 529 college savings plan.While every state's 529 tax deduction rules and contribution limits vary, most states will accept contributions until all account balances for the same beneficiary reach $235,000 to $412,000. Check with your state to discover your specific limits.
Depending on your financial situation, converting some of the funds from your traditional IRA into a Roth IRA could be a smart strategy. You're able to withdraw the funds from a Roth IRA tax-free, and Roth IRAs are excluded from required minimum distribution rules. Furthermore, if you're ineligible to contribute to a traditional or Roth IRA due to income limitations, you can still contribute to a "nondeductible" traditional IRA and then process what's known as a "backdoor" Roth conversion.
When you sell stocks for a gain, you face capital gains taxes. But you can counterbalance these gains by selling some of your "losing" stocks and writing off the losses. Talk with your accountant about whether this strategy would work for you; if it will, you need to harvest your losses before the year closes out.
Do you have a flexible spending account, or FSA, at work? Check the detail of your company's policy; many are "use it or lose it," meaning if you don't use the full amount in your FSA by year's end, that money will not roll over.
New federal laws permit employers to let their workers roll over a maximum of $500, but it's the employers choice whether or not to allow this rollover. Also, some employers give their workers a grace period until March of the following year to use the prior year funds, while other employers require that the funds are used by Dec 31. Check with your HR department to learn your employers' rules.
Remember that FSA funds can be used for a lot more than just prescriptions and co-pays. If you have money you need to spend before it's gone, you may also be able to use it for things like dental work, glasses or contact lenses, and even some qualified over-the-counter medicine and supplies.
Secure some additional tax deductions for 2014 by donating to a charitable cause. As long as you itemize your donations, you can claim everything from cash donations to goods to used vehicle donations. You can even give some of your stock to charity, thus avoiding capital gains tax.
Just be sure to get a signed and dated receipt from the charity, noting the amount of your contribution -- especially if you're donating goods instead of cash. As an added precaution, take photographs of any high-value donations (over $250).
You may qualify for another tax credit by making energy-efficient home improvements like windows, insulation and roofing. You'll also save more in the long run on your home's heating and cooling costs. To see which improvements qualify for a tax credit, go to the federal government's energy savings website, which lists comprehensive details that are broken down state-by-state.
If you need to enroll for coverage on the healthcare exchanges, you have until Dec. 15, 2014 to sign up for coverage that begins on Jan. 1, 2015. If you're already enrolled in a marketplace plan, you may be able to change your coverage if you've had a qualifying life event, such as a marriage or a move to another state.
You can give up to $14,000 to individuals per year without needing to file a gift tax return. If you're married, you and your spouse can each bequeath gifts of $14,000 to an individual without triggering a taxable event. If you decide to give a major financial gift to your children, talk to your kids first about strong money-management skills. Here's a free guide to help to talk to your kids about money.
Giving a little bit each year can also help reduce your overall estate tax burden (although the estate tax exemption is $5.34 million in 2014, which means few taxpayers will need to worry about this).