All three major indexes edged up after the Commerce Department reported that retail sales rose for the fifth straight month in November, as the biggest jump in department store sales in two years gave the holiday shopping season a strong start. Total retail sales increased 0.8 percent in November following a 1.7 percent gain in October.
Wal-Mart Stores Inc., Target Corp. and Costco Wholesale Corp. were all up less than 1 percent in late morning trading. Best Buy Co. fell sharply after reporting disappointing results.
Separately, the government reported that wholesale prices rose by the largest amount in eight months in November due to a large increase in the cost of energy. But there was little sign of inflation excluding the volatile energy and food segments. That showed that the weak economy is keeping prices in check.
Investors were also encouraged after the government said inventories held by U.S. businesses rose for a 10th consecutive month in October and sales rose by the largest amount in seven months. That's a sign that businesses are rebuilding their stockpiles and feeling more confident about the economy.
A survey from the Business Roundtable, an association of CEOs of big U.S. companies, also showed that 45 percent of executives say they expect their companies to add more workers over the next six months. That's the highest percentage since the survey began in late 2002.
"The economy is beginning to feel more stable than it has been," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.
The Senate also voted late Monday to advance the nearly $900 billion tax-cut legislation toward final passage. A vote that would send the proposal to the House is expected Tuesday.
In late morning trading, the Dow Jones industrial average rose 54.80, or 0.5 percent, to 11,483.36. The Standard and Poor's 500 index rose 3.52, or 0.3 percent, to 1,243.98. The Nasdaq composite index rose 8.13, or 0.3 percent, at 2,633.04.
Treasury prices continued to fall, pushing their yields higher. The yield on the 10-year Treasury note jumped to 3.39 percent, its highest level since May 17 and a big jump from the 3.28 percent it traded at late Monday. The yield on the 10-year note helps set interest rates on many kinds of loans including mortgages.
Bond yields have been rising steadily over the past two months as investors raise their expectations for economic growth and inflation. The 10-year yield was as low as 2.39 percent on Oct. 7.
Federal Reserve Chairman Ben Bernanke and his colleagues are gathering Tuesday for their last scheduled meeting of 2010. No policy changes are expected. But Fed policymakers will examine the effectiveness of their $600 billion bond-buying program and discuss the implications of a tax-cut plan emerging from Congress.
Best Buy fell 14.4 percent to $35.70 after the retailer said its third-quarter net income fell more than expected as it lost sales of TVs and mobile devices to competitors. The company also cut its full-year outlook.
Shares of HCP Inc., a real estate investment trust that owns and operates health facilities, rose 3.7 percent to $33.70 after the company said it will buy all the real estate assets of HCR ManorCare for $6.1 billion in cash and stock. HCR runs more than 300 rehabilitation and nursing facilities.
The dollar rose 0.1 percent against an index of six other currencies. Oil prices hovered below $89 a barrel. Gold for February delivery rose 60 cents to $1,398.70 an ounce.