Good tax, benefits news seen as markets close higher

Stocks closed higher Friday after a quiet session that turned the S&P 500 index positive for the year.

Traders were relieved that Congress extended a payroll tax holiday for workers and emergency jobless benefits. Letting the programs expire would have reduced economic growth by about 1 percent, analysts said.

The final business day before Christmas also was the slowest full day of trading so far this year. Traders exchanged 2.22 billion shares, about half of the recent average.

Stocks have risen steadily since Tuesday on hopeful signs about the pace of economic growth in the fourth quarter, which ends next week. New claims for unemployment benefits fell last week to the lowest level since April 2008, long before anyone realized the nation was in a recession.

Mixed economic reports Friday did little to derail that optimism. The Standard & Poor’s 500 index added 11.33 points, or 0.9 percent, to 1,265.33. It started the year at 1,257.64.

Stocks might surge into the new year if the S&P 500 passes a couple of key technical thresholds, said Todd Salamone, research director at Schaeffer’s Investment Research.

Fund managers currently hold relatively few stocks, Salamone noted, and many of their funds are negative for the year. If the S&P 500 rises farther above its break-even point for the year or its average over the past several months, fund managers might flood into the market in a last-ditch attempt to improve their annual returns, he said.

The Dow Jones industrial average rose 124.35 points, or 1 percent, to 12,294. Bank of America Corp. was the Dow’s biggest gainer, adding 2.4 percent. All but two of the 30 Dow stocks rose, Alcoa Inc. and Boeing Co.

The Dow has risen 527.74 points, or 4.5 percent in the past four days. It was the first four-day winning streak for the Dow since mid-September.

The Nasdaq composite index gained 19.19 points, or 0.7 percent, to 2,618.64.

Spending, income gains lag hopes, may hinder growth

Consumers spent at a lackluster rate in November as their incomes barely grew, suggesting that Americans may struggle to keep spending more into 2012.

Spending rose just 0.1 percent in November, matching the modest October increase, the Commerce Department reported Friday. Incomes rose 0.1 percent, the weakest showing since August’s 0.1 percent decline.

Both the spending and income gains fell below expectations. Economists have said that solid increases in spending could boost economic growth in the final three months of what has been a disappointing year.

Dollar rises against other currencies in thin trading

The dollar rose against other major currencies after the U.S. government released a pair of mixed economic reports. Currency trading was thin Friday. U.S. financial markets will be closed Monday in observance of Christmas, which falls Sunday.

The euro fell to $1.3040 in late trading Friday from $1.3043 late Thursday. The British pound fell to $1.5605 from $1.5678. The dollar rose to 0.9371 Swiss franc from 0.9364.

The Commerce Department said Friday that orders to U.S. factories for durable goods rose 3.8 percent in November, the biggest gain since July.

— From news service reports