US shoppers lift mood on Wall St

Stocks on Wall Street and in Europe extended recent gains on signs of better-than-expected consumer spending in the world's largest economy.

Data showed that sales at US retailers rose more than forecast in November, while optimism among small businesses climbed to the highest level in three years.

In midday trading, the Dow Jones Industrial Average rose 0.6 per cent, while the S&P 500 Index gained 0.39 per cent and the Nasdaq Composite Index advanced 0.37 per cent.

The jump in retail sales is "indicative of an economy that is beginning to recover some strength," Janna Sampson, co-chief investment officer at OakBrook Investments in Lisle, Illinois, told Reuters.

Investors were waiting for the Fed's latest take on the economy.

Policy makers at the US central bank were meeting today for the last time this year. Their statement is expected to reiterate plans to buy US$600 billion of Treasuries through June 2011 to bolster growth.

The National Retail Federation, an American industry group, boosted its holiday sales forecast, expecting retail sales in November and December, excluding cars, petrol and meals at restaurants and online sales, to be up 3.3 per cent. That compares with its previous forecast for a 2.3 per cent gain.

"The start to the holiday season has surpassed all expectations," NRF President and CEO Matthew Shay said in a statement.

Another group, the International Council of Shopping Centers, also lifted its holiday forecast range by half a percentage point to between 3.5 per cent and 4 per cent, saying it expected the strongest holiday season since 2005.

US Treasuries declined as today's optimistic economic data lowered the appeal of fixed-income securities. The yield on the benchmark 10-year note climbed to 3.36 per cent from 3.28 per cent late Monday, as economic growth forecast were being sharpened.

"The strong data points to an upward revision in third-quarter GDP from 2.5 per cent to 2.9 per cent, with Q4 also being in a 2.5 per cent to 3 per cent range,"

Ward McCarthy, chief financial economist and managing director in Jefferies & Co's fixed-income division, told Reuters.

It wasn't good news everywhere. Best Buy Co plunged 14 per cent, the largest decliner in the S&P 500, after the world's largest consumer-electronics retailer posted third-quarter earnings that fell short of analyst estimates. Its annual earnings forecast also failed to meet analyst estimates.

President Barack Obama met Warren Buffett and Bill Gates for a conversation that touched on how to expand the economy, the White House said.

The meeting, also attended by Gates' wife Melinda, focused on an initiative to encourage the wealthiest Americans to give the majority of their wealth to charity.

"During the visit, they also discussed ideas for growing the economy and making America more competitive including investment in education to better prepare the next generation and investing in innovative areas with opportunity for growth," the White House said in a statement.

The benchmark Stoxx Europe 600 Index gained 0.2 per cent, extending its climb for the seventh day and closing at its highest level in more than two years.