DECEMBER 29, 2010, 2:43 P.M. ET.

Stocks Add to Strong December

By KRISTINA PETERSON And JONATHAN CHENG

Stocks extended their strong December run, helped by gains in the energy sector and a drop in the U.S. dollar.

The Dow Jones Industrial Average rose 40 points, or 0.4%, to 11616, adding to a gain of more than 5% this month. McDonald's led with a 1.1% gain, while Walt Disney, International Business Machines and Chevron all gained 0.8% or more.

.The Nasdaq Composite gained 0.3% to 2671. The Standard & Poor's 500-stock index added 0.3% to 1262.

Market moves are expected to be muted for the rest of the week as investors look to lock in the year's gains. Volume has been light thanks to holiday vacations and a deluge of snow in the Northeast.

The Dow is up about 11% for 2010, while the S&P 500 is up nearly 13% and the Nasdaq is up nearly 18%. Small-cap stocks have surged even more, with the Russell 2000 up more than 26%. Almost all those gains have come in the second half of the year, with the Dow up 7.5% in the fourth quarter alone. Trading for the year wraps up on Friday.

Traders said after the volatility of this spring, the market's year-end returns were surprisingly good.

"It's the stealth rally—at the end of the day, the markets had quite a good year," said Mitch Rubin, chief investment officer at RiverPark Advisors. The spring slump and the May 6 "flash crash" added volatility but didn't undercut the indexes severely, he said.

Energy and materials stocks were two of the best performers Wednesday. Halliburton rose 2%, Schlumberger gained 2.1%, and Occidental Petroleum advanced 1.8%. Monsanto gained 3.2%.

Sears Holdings soared 6.2% to lead consumer-discretionary stocks, one of the strongest sectors of the day, building on gains made this week after it began promoting a new movie-download service.

The consumer-discretionary sector rose 0.5% on Wednesday and has risen 26% this year to lead the S&P's 10 sectors. Even with the sector's surprising strength, some investors were cautious about reading it as a sign of economic recovery, particularly after a recent dose of sobering housing and consumer confidence data.

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Treasury prices rose, pushing the yield on the 10-year note down to 3.35%. Yields move inversely to prices.

Crude-oil futures prices fell 0.4%, while gold futures climbed.

Write to Kristina Peterson at kristina.peterson@dowjones.com

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Associated Press

The Dow reached a 28-month high on Tuesday. Above, Andrew O'Connor, second left, works with fellow traders on the floor of the New York Stock Exchange on Dec. 2.

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