Stocks closed higher Friday after a quiet, pre-holiday session that turned the S&P 500 index positive for the year.
Traders were relieved by news that Congress extended a payroll tax holiday for workers and emergency unemployment benefits. Both programs were set to expire at the end of the year. Letting that happen 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 just 2.22 billion shares, about half of the recent average. The market will be closed on Monday because Christmas falls on a Sunday this year.
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.
A series of 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 have underperformed the market and are negative for the year. If the index 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 worst thing that can happen for a fund manager is to underperform and be in the red when your benchmark, the S&P index, is in the green" for the year, Salamone 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.
Earlier Friday, the government said that consumer spending and incomes barely grew in November. The weak gains suggest that consumers may have trouble sustaining their spending into 2012.
In another worrying sign, a measure of business investment decreased for the second straight month. Business investment has been a pocket of strong demand and spending amid a sluggish recovery. A tax break that encouraged companies to invest in new equipment and facilities expires at the end of the year.
Yet hopes for the economy remained high after this week's encouraging news about the job market and strong holiday sales for retailers.
Among the companies making big moves:
_ Rambus Inc. jumped 12.2 percent after the technology licensing company said it reached a patent license deal with Broadcom Corp. and settled a lawsuit with the chip maker.
_ TripAdvisor Inc. rose 6.1 percent, the most in the S&P 500, as traders reassessed the value of the newly-spun off travel review website. The stock had fallen sharply since it officially started trading on Wednesday. It recovered some losses on Friday as analysts weighed its rapidly growing revenue and market share.
_ Eastman Kodak Co. rose 9.5 percent after the struggling photography company said its general counsel, Laura Quatela, would become co-president on Jan. 1.
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