Market Wrap: Wall Street Bounces Back After 3-Day Slump

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Stocks Close Sharply Lower, As Energy Stocks Lead Decline
Andrew Burton via Getty Images

By Caroline Valetkevitch

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 SP 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 SP 500, including Urban Outfitters, up 7.6 percent at $32.29. The SP 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 SP 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 SP 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 SP 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.
  • 1. Open a 401K or IRA account

  • 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.

    2. Max out your 401(k) contributions

  • 3. Take your required minimum distributions

  • 4. Contribute to a 529 plan

  • 5. Think about a Roth IRA conversion

  • 6. Consider tax loss harvesting

  • 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.

    7. Use your FSA funds

  • 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).

    8. Donate to charity

  • 9. Make your home more energy-efficient

  • 10. Sign up for health insurance

  • 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).

    11. Gift your wealth

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