NEW YORK (AFX) - U.S. stocks closed well off their highs Tuesday, after earlier rallying on news of the strongest productivity rise in two years coupled with contained labor costs.
Sears Holding Corp advanced on earnings that exceeded expectations and Apple Computer and Fedex bounced higher on positive new research notes.
The Dow Jones Industrial Average closed up 21.85 points at 10,856.86, after earlier rising more than 85 points.
The S&P 500 closed up 1.61 points at 1,263.70, after earlier rising about 10 points. The Nasdaq Composite finished 3.12 points higher at 2,260.76. after earlier gaining more than 18 points.
Stock price gains were solid throughout most of the session, but lost much of their momentum in the final half hour of trade.
"I don't see any news to explain it," said Philip Dow, director of equity strategy at RBC Dain Rauscher. "I think it may be just another example of the kind of manic program trading moves you can see. We live in a world where people don't own stocks - they rent them."
The stock market in general has been staging a traditional year-end rally during the last five weeks, benefiting from data pointing to economic strength and oversold conditions.
The positive trend was in force once much of Tuesday as the market drew strength from news from the Labor Department of the fastest increase in productivity in more than two years.
Productivity in the business sector surged at a 4.7 annual rate in the third quarter. Economists polled by MarketWatch had expected an increase of 4.5.
Unit labor costs -- a gauge of wage-push inflationary pressures -- fell at a 1 annual pace in the quarter, revised down from a 0.5 decrease.
"The data showed good growth, with subdued inflation and good labor costs, and that is a perfect combination for equities, said Jim Awad of Awad Asset Management.
The Commerce Department said orders for U.S.-made factory goods increased 2.2 in October, more than reversing a decline in September, roughly in line with the expectations of economists polled by MarketWatch.
Crude futures shook off early losses to finish higher. The futures contract closed up 3 cents at 59.94 a barrel, after earlier trading as low as 59.55.
Gold futures finished higher for the fifth session in a row, rising 1.20 to close at 510.20 an ounce, a fresh 18-year high. Gold has been rallying on strong physical demand and inflation fears and there is now speculation that it could reach 600 an ounce by year-end.
The yen early Tuesday reached an all-time low vs. the euro and fell to its weakest levels against the dollar in nearly three years, as investors focused on the interest-rate differentials between other countries and Japan.
The yen later recovered somewhat and last traded at 142.38 yen per euro, after earlier trading at 142.77 per euro. The euro in late trade was down 0.03 at 1.1788 as the dollar fell 0.1 to 120.79 yen.
Treasury prices were higher, benefiting from the productivity report, putting pressure on yields. The yield on the benchmark 10-year note last stood at 4.491, down from a three-week high of 4.57 in late trade Monday.
Stocks in motion
Shares of Sears Holdings closed up 1 at 122.88. Late Monday, the company reported a decline in third-quarter profit due to fashion mistakes, but investors responded well to the fact that its profit beat Wall Street expectations.
Apple Computer advanced 3.2 to 74.07. UBS raised its 2006 earnings estimates for the company.
The Wall Street Journal reported that Time Warner is working on a deal with Microsoft Corp. to come up with an online advertising service that would compete with Google Inc.'s .
Microsoft shares ended down 13 cents at 27.71, as Time Warner rose 2 cents to 18.25 and Google fell 25 cents to 405.25
Merrill Lynch upgraded FedEx, Corp. to buy from neutral, noting a firm pricing environment. The stock rose 3.4 to 99.01.
Smurfit-Stone rose 3.4 to 12.80 as Temple-Inland. Inc. increased 1.6 to 43.29 after Morgan Stanley forecast that Prices for containerboard, the basic materials of boxes and shipping containers, will rise significantly in 2006.

Aus close

Good morning traders!

In Asia today, the Nikkei ended the day up 61.28 points at 15,484.66 while the Hang Seng ended the morning up 22.52 points at 15,013.13.

Oil prices tipped over $60 a barrel in Asian trading due to forecasts of an extended cold snap in the US. New York's main contract, light sweet crude for delivery in January, was up 34 cents to $60.28 a barrel from its close of $59.94 in the US overnight.

Early broker notes:

AB FOODS DOWNGRADED TO 'NEUTRAL' VS 'OUTPERFORM' AT CSFB, TGT 850P VS 830P
BOC UPGRADED TO 'OUTPERFORM' VS 'NEUTRAL' AT CSFB, TGT TO 1300P
VT GROUP UPGRADED TO 'BUY' VS 'HOLD' AT ABN AMRO
VODAFONE DOWNGRADED TO 'NEUTRAL' VS 'OUTPERFORM' AT CSFB, TGT TO 135P VS 160P

Quite a list of ex-divis today to be aware of.....

Happy trading!

G.

Outlook

LONDON (AFX) - UK blue chips look set to open flat this morning after yesterday's good advance, with Wall Street closing firmer but off highs overnight and as crude prices moved back above 60 usd a barrel in Asian trade, dealers said.
Spread bettors IG index expect the FTSE 100 index to open around 2 points lower at 5,536.

MARKETS
FTSE 100 5,538.8 up 28.4
FTSE 250 8,487.9 up 11.9
DJIA 10,856.90 up 21.90
Nasdaq Comp 2,260.76 up 3.12
S&P 500 1,263.70 up 1.60
Tokyo: Nikkei 15,484.66 up 61.28
Hang Seng midday 15,013.13 up 22.52
Gold 507.30 usd (505.60 usd)
Oil - Brent Jan 57.61 usd (57.73 usd)

TODAY'S PRESS
* TESCO and Asda credit ploy funds fast growth; supermarkets rely on suppliers for free finance - FT
* ITV will pay up to 175 mln stg for Friends Reunited - FT
* Pensions industry faces costs of tens of millions of pounds following the government's decision to close next April's planned tax break on holding residential property and exotic investments - FT
* SCHRODERS switches bulk of pension fund out of equities - FT
* CARILLION will today announce it has agreed to buy MOWLAM for more than 290 mln stg in a cash and shares deal - FT
* Royal Mail seeks 2 bln stg cash to boost after stamp price rebuff - Times

PRESS COMMENT
FT
THE LEX COLUMN comments on HBOS (a good bank to own during potentially bad times), Intellectual property (while UK is very productive in a scientific research, its track record at commercialising the results is less impressive), EU budget (UK rebate has dominated headlines, but, in economic reality, is insignificant), TNT (investors can look forward to a leaner group, and the potential for more fireworks down the road), Korean equities (already pricey in historical terms, though it remains one of Asia's cheaper markets on a 2005 price-earnings multiple of around 11 times), Time Warner (recent history is not on Carl Icahn's side; media conglomerates pursuing break-ups - the strategy he is pushing for Time Warner - have hardly soared in value)
Telegraph
NEXT (break-up speculation) - QUESTOR: SEVERN TRENT (buy), GREENE KING (hold), HALMA (sell)
Express
SHARE WHISPER: COLLINS STEWART TULLETT (rumours that Macquarie is on the look out for a UK brokerage)
Times
Directors' dealing: HALFORDS (chief executive and finance director sell 1.98 mln stg of stock) - Rumour of the day: MILLENNIUM & COPTHORNE (word it is mulling the launch of a 340 mln stg real estate investment trust that would contain some of its 91 properties) - TEMPUS: SEVERN TRENT (avoid), QUINTAIN (hold), GREENE KING (hold)
Guardian
BIZSPACE (Trefick increases holding to nearly 24 pct)
Independent
THE INVESTMENT COLUMN: HBOS (buy), GREENE KING (buy), API (avoid for now)

Good morning all,

Is it just me or is anyone else find it too "exhausting" the run up to Christmas this year?

Which reminds me, after our discussion the other day on Pensions -

What about Browns U-turn on "A" day investments! Looks like most of the seminars and books written in preparation are to be binned!

Unfortunetely it will stop people going ahead with SIPPs, which are still a great idea, especially as from next year the current contribution restrictions are going to be removed.

I've already got my employer to agree to all me to negotiate for Single contribution just before year end (each year) to put into my SIPP instead of the poor performing money purchase pension everyone else has. Its a pity others aren't interested in doing the same.

Midday Market Summary

Just can't be bothered with Christmas any more LW, apart from keeping the "outlaws" happy of course......mind you I am looking forward to our do In Brum next week.

Thats good.

I did my "works" do last Friday. I have my other halfs do this Friday, the charity I'm on the committee sometime next week, my mothers on Christmas eve and I still have to organise my own company do (I have a small company as well as work for someone else) but I tend to leave that one for the new year.

I have a rule - Turkey only on Christmas day!

End-of-day Market Summary