The Dow Jones industrial average (INDU) rose 100 points, or 0.8%, the S&P 500 (SPX) added 14 points, or 1.1%, and the Nasdaq composite (COMP) increased 32 points, or 1.2%.

The gains were led by financial stocks. Bank of America (BAC, Fortune 500) surged more than 4%, making it the best performer in the Dow. Morgan Stanley and Goldman Sachs (GS, Fortune 500) were also up more than 4%, while Citigroup (C, Fortune 500) and JPMorgan Chase rose between 2% and 3%.

Tuesday’s broad move higher came as investors found comfort in Fitch Rating’s comments about Europe being on the right path toward solving its debt problems.

“The unwinding of the imbalances that led to the crisis is well underway and the headwinds … should being to ease towards the end of the year,” said David Riley head of Fitch’s sovereign group, at a presentation in London.

On the sidelines of the presentation, Fitch officials also reiterated the agency’s December stance that it doesn’t plan to downgrade AAA-rated France this year.

Fitch’s head of ratings also indicated there’s a “significant chance” of a downgrade for Italy. The ratings agency plans to make a decision on all the European countries it currently has on negative watch by the end of the month.

A solid start to U.S. quarterly results also brightened the mood. Late Monday, investors brushed off Dow component Alcoa (AA, Fortune 500)’s fourth-quarter loss as the company topped sales estimates and issued an upbeat outlook for aluminum demand in 2012.

While no major corporate reports are scheduled for Tuesday, the rest of the week will bring reports from Lennar (LEN) and JPMorgan Chase (JPM, Fortune 500).

Overall, earnings for companies in the S&P 500 are expected to be up 7.5% in the final three months of 2011 versus the same period in 2010, according to research from S&P Capital IQ.

Stocks managed to eke out gains Monday as investors remained on edge about Europe’s ongoing crisis, while bracing for corporate earnings.

World markets: Britain’s FTSE 100 (UKX) gained 1.7%, the DAX (DAX) in Germany added 2.3% and France’s CAC 40 (CAC40) climbed 2.5%.

European bank shares traded on the New York Stock Exchange also posted solid gains early Tuesday. Shares of Deutsche Bank (DB), UBS (UBS) and Credit Suisse (CS) all rose.

Asian markets ended higher. The Shanghai Composite (SHCOMP) rose 2.7%, while the Hang Seng (HSI) in Hong Kong ticked up 0.7% and Japan’s Nikkei (N225) added 0.4%.

Companies: Shares of Tiffany (TIF) slid after the luxury retailer cut its outlook for the year, blaming weak holiday sales in the United States and Europe.

On the upside, Lululemon Athletica’s (LULU) stock jumped after the apparel maker raised its fourth-quarter earnings guidance.

Liz Claiborne (LIZ) shares tumbled after the apparel company lowered its 2012 outlook and announced the departure of its chief financial officer, Andrew Warren. Warren is leaving the company to work as CFO at Discovery Communications (DISCA).

Liz Claiborne is changing its name to Fifth & Pacific Companies, and will trade under the ticker symbol FNP starting in May. The company sold its namesake brand toJ.C. Penney (JCP, Fortune 500) in October.

Shares of GlaxoSmithKline (GSK) fell following reports that the drugmaker was trying to sell the remainder of its over-the-counter brands as soon as possible. Last month, Glaxo sold brands, including Beano and Ecotrin, to Comet and Pediacare maker Prestige Brands Holdings (PBH) for $660 million.

Economy: The Census Bureau reported that wholesale inventories for the month of November rose 0.1%. Analysts surveyed by Briefing.com were expecting inventories to have increased by 0.6% in November, after expanding by 1.2% in October.

Currencies and commodities: The dollar fell against the euro, the British pound and the Japanese yen.

Oil for February delivery added $1.36 to $102.67 a barrel.

Gold futures for February delivery gained $28.90 to $1,637 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell slightly, pushing the yield up to 1.96% from 1.96% late Monday.

The win by Hyundai is the second time it captures car of the year honors at the show in four years. Its luxury Genesis won the award in 2009.

137PrintCommentIt also marked another sign of the growing competitive threat that the Korean automaker poses to Detroit. Hyundai Motor’s two brands, Hyundai and Kia, captured nearly 9% of the U.S. market in 2011, nearly double the share it had five years ago.

“Sporty yet sensible. Luxurious, yet affordable. Spunky, but safe,” said Jayne O’Donnell of USA Today, one of the judges. “The Elantra is a series of paradoxes and every one is another argument for the latest impressive entry in the Hyundai lineup.”

Cool cars from Detroit auto show
The Hyundai beat out the Ford (F, Fortune 500) Focus and the Volkswagen (VLKAF) Passat for the honors, the latter the winner of the Motor Trend Car of the Year honors. (New plug-in Fusion unveiled by ford.)

0:00 / 1:47 Hyundai’s new Elantra approaches perfection
The Range Rover Evoque, which had won Motor Trend’s SUV of the year in 2011, won in Detroit for its combination of performance and fuel efficiency.

“Range Rover successfully charts a new direction for the venerable SUV trailblazer with a fresh design and advanced thinking about environmental issues,” said Fortune magazine’s Alex Taylor, one of the judges.

The win is another lift for Range Rover, the British SUV maker that Ford sold to Indian automaker Tata as is shed its non-core brands over the last three years. It is a departure for Range Rover, which is known for its tradition of large, luxury SUV’s designed for off-road driving.

0:00 / 1:18 Range Rover Evoque: Rugged and stylish
Powered by a turbocharged four-cylinder engine and with a six-speed automatic transmission, the Evoque is tuned more for on-road performance and fuel economy. It gets an EPA-estimated 28 miles per gallon in highway driving, making it the most fuel-efficient Land Rover vehicle.

The Evoque beat out Honda’s CR-V and BMW’s X3 SUVs.

The fight over a temporary extension of the payroll tax cut and long-term federal unemployment benefits sucked up all the oxygen on Capitol Hill. And it will suck up more between now and the end of February, when the two-month extension Congress managed to pass expires.

41PrintCommentIn the meantime, lawmakers left more than 50 expiring business and individual tax breaks hanging in the balance, along with an expanded mass transit break for workers.

Officially, of course, they expired on Dec. 31. But like Lazarus, they may be risen from the dead by Congress, which could choose to extend them and make the breaks retroactive to the start of this year. That way they’ll be in effect before taxpayers have to fill out their federal returns for this tax year in early 2013.

The value of keeping the so-called tax extenders on the books is debatable. Tax experts argue that many should be ditched.

But the everlasting question mark punctuating these and other tax breaks is a source of frustration for anyone who takes tax and financial planning seriously.

“Taxpayers are very unhappy because they don’t know what’s going to happen; they can’t plan,” said David Mellem, who is certified to represent taxpayers before the IRS.

Expanded mass transit break: For three years, workers whose employers subsidized their commuting costs were entitled to receive the same amount of money whether they took mass transit or drove to work and paid for parking.

The parity in the benefits, which are tax-free to workers, meant mass transit commuters got more than they had in previous years.

Congress = Uncertainty, Inc.
But now Congress has let the mass transit expansion expire. As a result, those who take mass transit may only receive up to $125 a month tax-free, whereas those who drive to work can receive $240 a month.

State and local sales tax deductions: Taxpayers are allowed to deduct their state and local income tax on their federal return. But in recent years, lawmakers gave them a choice: They either could deduct their income tax or the state and local sales taxes they paid in a given year.

The choice benefits residents of the nine states that don’t actually have an income tax.

As of now, those residents won’t have that choice for this tax year.

What the payroll tax cut deal will do
Mortgage insurance deduction: In addition to deducting the interest they pay on their mortgage, taxpayers whose adjusted gross income doesn’t exceed $110,000 have been allowed to treat the premiums they pay for mortgage insurance as deductible interest too.

But that may not be an option for tax year 2012.

School teacher tax deduction: Many K-12 teachers pony up their own money to buy supplies and equipment for their classrooms. Unless Congress acts, they will no longer be able to deduct up to $250 a year for those expenses.

Higher education tuition deduction: For tax year 2011, taxpayers are allowed to deduct qualified tuition and related expenses paid on behalf of anyone in their household to a college or university. The deduction is available regardless of whether one chooses to itemize or not.

The deduction is worth up to $4,000 for someone whose adjusted gross income doesn’t exceed $65,000 if single ($130,000 if married filing jointly). Those making between $60,000 and $80,000 ($130,000 to $160,000 if married), however, may only claim up to $2,000.

Tax year 2012 may be a different story. But look on the bright side. While the tax break hasn’t been renewed, it means one less complicated deduction for taxpayers to figure out.

Larger AMT exemption amounts: To protect more than 20 million middle class households from having to pay the Alternative Minimum Tax, Congress typically passes an AMT “patch” every year.

They have yet to do so for 2012, but because most Americans don’t have to file their returns until early 2013, lawmakers could pass a patch at any point this year and have it apply in time for the 2013 filing season.

The AMT was intended primarily for high-income taxpayers. But in recent years, it has threatened to engulf the less affluent because the income thresholds determining who must pay the tax were never adjusted for inflation.

The patch increases the amount of income tax filers may exempt from consideration when calculating whether they need to pay the AMT.

Without the AMT patch, tax filers would only be able to exempt $33,750 in income if single or $45,000 if married filing a jointly, according to CCH, a tax information publisher. That is considerably less than the $48,450 that single filers and $74,450 joint filers may claim on their 2011 returns.

Sarah M. Manley, a marketing consultant in Waconia, Minn., with food bought at a discount and stockpiled in her freezer.

Lynette and Govind Paudel, and their children Alina, 3, Sophia, 9, and Ravi, 7, of Copley, Ohio, with the 2003 minivan Ms. Paudel said they do not plan to replace “until it breaks.”

As the weak economy has trudged on, they have leaned on credit cards to pay for holiday gifts, many bought at discounts. They are dipping into savings to cover spikes in gas, food and rent. They are substituting domestic vacations for international trips, squeezing more life out of their washing machines and refrigerators and switching to alternatives as meat prices have risen.

That leaves little room for a big increase in spending in 2012, economists say, a shaky foundation for the most important pillar of the American economy.

“The consumer is far from healthy,” said Steve Blitz, senior economist for ITG Investment Research.

Even the seemingly robust holiday shopping season is raising concern. After a strong start on Thanksgiving weekend, a pronounced lull followed, causing retailers to mark down products heavily in the week before Christmas. While final numbers for the season are not in, analysts say they are worried that retailers had to eat into profits to generate high revenues.

Consumer spending makes up 70 percent of the economy, so until it ignites, general growth is likely to be sluggish.

Macroeconomic Advisers, a forecasting company, projects growth of around 2 percent for the first half of this year, down from an estimate of 3.6 percent in the fourth quarter of 2011 and just 1.8 percent in the third quarter.

For consumers, the reasons for the sluggishness are clear: incomes are essentially flat, job growth is modest, and more than 40 percent of the new jobs in the last two years have been in low-paying sectors like retail and hospitality.

While consumer spending is not “going to collapse,” said Joel Prakken, senior managing director at Macroeconomic Advisers, “there are some headwinds there.”

Sarah M. Manley, a marketing consultant with two young sons in Waconia, Minn., has developed coping strategies in the last few years. Laid off in 2008, she started a business. She and her husband can make their mortgage payments and are paying off debts from when a storm damaged their roof.

“It’s not necessarily that I’m saving more money, but I’m paying off some of the debts that were amassed during the last three years, just trying to make headway,” Ms. Manley said.

To do that, she has changed habits. She uses the app GasBuddy to check prices at nearby stations before she buys gas for her car. She buys seasonal food on sale and freezes it — for Valentine’s Day, she plans to prepare crab legs she bought and froze last summer — and she is stocking up on holiday hams. She has switched from buying milk in gallon containers to buying it for less in plastic bags from the local gas station.

For big purchases, like the laptop she bought last summer, Ms. Manley still relies on credit, but is careful. She opens credit card accounts offering an introductory rate of no interest, then closes them just before the annual percentage rate kicks in.

“Everybody’s learned how to be frugal in the last two or three years,” she said.

Economic indicators suggest that, while things may not get worse for consumers this year, they will not get much better. In the third quarter of 2011, the most recent period for which figures are available, consumer spending rose slightly more than 1 percent, according to the Commerce Department.

Although housing sales have recently shown signs of recovery, prices are still falling and mortgage lenders are cautious. In November, contracts represented by 33 percent of members of the National Association of Realtors did not close, up from just 9 percent a year ago.

And with more than one in every five borrowers still owing more than their homes are worth, many homeowners feel too pressed to spend on much more than the essentials.

The stock market did not help consumers, either. Because of turmoil in the markets in the late summer and early fall, household wealth declined by $2.4 trillion in that period, a contraction likely to make people think twice about big purchases.

Adding to the uncertainty, financial weakness in Europe, and the potential expiration of the payroll tax cut and unemployment insurance benefits in two months, could further soften spending.

BP paid more than $21 billion in cleanup costs and economic damages as of Dec. 1, the company said on its Web site.

BP and Halliburton accuse each other’s employees of making critical mistakes that caused the blowout in the well off the Louisiana coast in 2010.

BP owned the Macondo lease, and Halliburton provided well-completion services for the project. The two jointly face more than 500 lawsuits, which have been combined for pretrial processing in federal court in New Orleans, where a judge is scheduled to begin a trial in February to determine liability for the spill.

Halliburton, based in Houston, has said in court papers that its cementing-services contract requires BP to indemnify it from all damage claims, even if its employees were found to have shared blame for the disaster. Halliburton has said in court filings that the actions of BP’s employees caused the explosion.

Exxon waged a legal battle with Venezuela after President Hugo Chávez in 2007 took control of various big projects controlled by foreign oil companies. The move by Mr. Chávez came after escalating tensions with Exxon that included a raid on the company’s offices in Caracas, the Venezuelan capital. The seizing of Exxon’s assets opened the way for the nationalization of dozens of other companies’ assets in Venezuela.

Patrick McGinn, a spokesman for Exxon, said in a statement that the decision by the International Chamber of Commerce confirmed that Petróleos de Venezuela, the country’s national oil company, had a “contractual liability” to Exxon. Exxon received the decision on Friday.

Venezuelan officials did not respond to calls on Sunday seeking comment on the decision.

The ruling by the International Court of Arbitration, which is based in Paris, is just one of several important arbitration cases Venezuela is facing over its nationalizations, including a separate case between Exxon and Venezuela that is pending before the International Center for Settlement of Investment Disputes, part of the World Bank.

Venezuela’s energy minister, Rafael Ramírez, said last year that Venezuela had calculated that the country could pay as much as $2.5 billion in compensation to Exxon and ConocoPhillips, another big American oil company, as a result of the arbitrations over the oil claims.

Despite Venezuela’s legal battles over the 2007 nationalizations, the country’s oil industry remains open to substantial foreign investment, in contrast to those of other large oil-producing countries like Saudi Arabia and Mexico.

The American oil company Chevron still ranks among Venezuela’s largest foreign investors, along with Chinese, Italian and Russian companies.

They are lured by the potential of the Orinoco Belt, an area with heavy oil in southern Venezuela, which the United States Geological Survey said had the largest oil accumulation it ever assessed.

While political relations remain tense between Caracas and Washington, the United States remains the largest buyer of Venezuelan oil. But Venezuela’s crude oil exports to the United States have been declining.

Venezuela’s oil shipments to China, which have provided Venezuela with billions of dollars of loans, have been steadily climbing.

It’s the technology equivalent of searching the couch cushions for loose change.

The Federal Communications Commission late last week opened up the light spectrum that sits between individual television channels numbered 1 through 51. Wireless communications in those “white spaces” will be permitted as of Jan. 26 in a testbed location and will be opened up nationally in the following months.

Broadcasting in the white spaces means that a company like Verizon could deliver signal between channels 5 and 6, for instance. That gives it just a little extra capacity boost to give its customers faster service.

The announcement comes as wireless companies are facing a spectrum crunch crisis that has already begun to reshape the industry.

As smartphones and tablet sales have soared over the past several years, consumers’ demand for data has grown exponentially. All that data is taking up a growing amount of spectrum, or light waves, and carriers are simply running out of airwaves to cram data into. The FCC has said that a current spectrum surplus of 225 MHz will become a deficit of 275 MHz by 2014 (see chart above).

That’s why the FCC is committing to freeing up 500 Megahertz of spectrum over the next decade. But there’s a catch: That process includes voluntary auctions by a patchwork of television stations across the country that currently hold but aren’t using their spectrum. Many aren’t willing to give it up.

As those complicated wheelings and dealings get sorted out, the FCC is trying to scrounge up enough to get by. TV white spaces is a part of that effort.

“Unused spectrum between TV stations represents a valuable opportunity for provision of broadband data services in our changing wireless landscape,” said FCC Chairman Julius Genachowski in a statement.

It’s not a perfect solution. The white spaces spectrum will actually be unlicensed, which means that carriers can’t use it exclusively. But like Wi-Fi, which also operates in unlicensed spectrum bands, wireless companies will eventually be able to provide their customers access to a white spaces network hotspot in order to offload traffic from their own networks.

In addition, new mobile phones and tablets will need new chipsets.. And the FCC will only open up the white spaces for the time being in Wilmington, N.C., as it fixes a bug that could result in interference with wireless microphones, which also use white space to send signal to speakers.

Meanwhile, carriers aren’t just sitting on their hands. They’ve attempted to limit customers’ use of their networks by introducing tiered rates, which charge more by the gigabyte. That has effectively made cell phone bills go up for many heavy users.

The wireless companies are also trying to consolidate. AT&T (T, Fortune 500) fought hard to buy T-Mobile primarily for its spectrum holdings, a battle that it ultimately lost due to the government’s antitrust concerns. Sprint (S, Fortune 500) has inked deals with 4G wholesale providers Clearwire (CLWR) and LightSquared, and Verizon (VZ, Fortune 500) has purchased $4 billion of dollars of cable providers’ unused spectrum over the past month.

The good news for consumers is that the FCC is aware of the problem and thinking outside the box to free up more bandwidth for mobile communications.

“There are huge scarcity issues with spectrum,” said Rod Dir, CEO of Spectrum Bridge, the company approved by the FCC to manage the registry of devices that operate in white spaces. “This provides additional bandwidth in the market, not just for cellular carriers, but also for other wireless innovators.” To top of page

About 381,000 people filed initial jobless claims in the week ended Dec. 24, the Labor Department said Thursday. That was more than economists had expected and marked an increase of 15,000 from the prior week, when claims had fallen to their lowest level since April 2008.

The Labor Department adjusts the figures to account for seasonal trends, but still, the holidays can sometimes distort the numbers slightly. Economists look to the four-week average to smooth out volatility. In the latest report, that number decreased to 375,000, its lowest level since mid-2008.

“Around the holidays, initial claims tend to be volatile, so I think we don’t have to read too much into the small rebound today,” said Aichi Amemiya, an economist with Nomura. “We believe the labor market continues to improve.”

Meanwhile, continuing claims — which include Americans filing for their second week of claims or more — increased 34,000 to 3,601,000 in the week ended Dec. 17, the most recent data available.

Investors seemed to shrug off the numbers, optimistic that next week’s monthly jobs report will show employers ramped up their hiring slightly in December.

Economists surveyed by Briefing.com predict the report will show employers added 150,000 jobs in December, up from 120,000 the month before. The unemployment rate, however, is expected to rise from 8.6% to 8.7%, as discouraged workers re-enter the labor force to look for jobs again.

A CNNMoney survey of 20 top economists finds their fear of the economy falling into a new recession has retreated in the last three months, as they put the chances of a new downturn at only about 20%. Three months ago, they believed there was about a 30% chance. Only two of them have raised the risk of recession.

The economists also believe that the final economic readings will be among the strongest of 2011.

Gross domestic product, the broadest measure of the nation’s overall economic health, is expected to have grown at a 3.3% annual rate. That would be the best pace of growth since the spring of 2010 and nearly twice the 1.8% rate in the third quarter.

“Preliminary data is pointing to a solid fourth quarter of GDP growth that should carry the economy through the next 6 months,” said Sean Snaith, economics professor at the University of Central Florida.

The economists surveyed also expect that employers added 140,000 jobs to payrolls in December, which would mark the third straight month of improved hiring.

But they’re not getting overly excited about the outlook for growth in 2012. Growth for the full year is expected to be a more modest 2.4%, with only 2% growth in the first three months of the year.

Employers are expected to add only 1.6 million jobs, which comes to less than the 150,000 a month needed to keep pace with population growth — little changed from the expected gains in 2011 that left most economists and job seekers dissatisfied. The unemployment rate is forecast to edge down to 8.4% by the end of 2012, little changed from the current 8.6% rate.

Those surveyed also don’t believe the prolonged slide in home values will come to an end in the new year, with most expecting that higher housing prices won’t come until 2013 or later.

The economists are widely split on the biggest headwinds facing the economy going forward. The five who cite excess government debt make that the most popular choice, but four each pick continued weakness in the housing market and damage to the labor market by prolonged high unemployment.

And a variety volunteer their own risks, including those posed by the European sovereign debt crisis, Congressional gridlock and general uncertainty in the business conditions. To top of page

The Dow Jones industrial average (INDU) was down 1 point, or less than 0.1%, in morning trading. The S&P 500 (SPX) inched up 1 point and the Nasdaq (COMP) gained 2 points.

Trading volumes were well below average, with many market participants taking time off this week for the holidays. Stock markets in the United States and Europe were closed Monday for the Christmas holiday.

Stocks opened lower after a report said home prices fell 1.2% in October compared with September. But the market turned higher following a stronger-than-expected report on consumer confidence.

The Conference Board’s index of consumer confidence jumped in December to 64.5, up from 55.2 in the previous month, Economists surveyed by Briefing.com were expecting the index to rise to 60.

“Consumers are definitely showing a ray of hope here,” said Peter Cardillo, chief market economist at Rockwell Global Capital.

The advance comes on “extremely light volume,” said Cardillo. But the “bias remains to the upside,” he added.

U.S. stocks have been supported recently by signs of improvement in the economy, including declines in weekly claims for unemployment benefits and an uptick in new home construction.

But investors say the market remains vulnerable as the debt crisis in Europe continues to threaten the outlook for the global economy and financial markets.

While many investors have already closed their books for the year, the next few trading days could determine whether the major indexes end 2011 with gains or losses.

On Friday, investors pushed the S&P 500 back into positive territory for 2011 and the Dow up 6% for the year.

“I think we’ve got a decent chance of ending the year in positive territory, if not close to it,” on the S&P 500, said Bruce McCain, chief investment strategist at Key Private Bank.

Still, the bigger question is whether the stock market can continue moving higher in 2012 as economies in Europe and Asia appear to be slowing down, he added.

“The trends developing overseas are negative enough that it will be hard for U.S. economy to entirely avoid a slow down in the global economy,” said McCain.

Companies: Sears Holdings (SHLD, Fortune 500) on Tuesday reported a sharp drop in holiday sales compared to a year ago, and said the results will force it to close 100 to 120 Sears and Kmart stores. Shares plunged 18%.

On Monday, Sony (SNE) said it would end its joint venture in liquid crystal display panels with Samsung Electronics.
Are you a markets whiz?

World markets: European stocks closed mixed. The DAX (DAX) in Germany added 0.1% and France’s CAC 40 (CAC40) ended flat. London’s market remained closed.

Asian markets ended mixed. The Shanghai Composite (SHCOMP) fell 1.1% and Japan’s Nikkei (N225) fell 0.5%. Hong Kong’s market was closed.

Currencies and commodities: The dollar lost strength against the euro, the British pound and the Japanese yen.

Oil for February delivery rose 85 cents to $100.53 a barrel.

Gold futures for February delivery lost $9.30 to $1,596.70 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury edged higher, with the yield holding easing to 2.01% late Friday. To top of page