While you were sleeping: Citigroup, US retail sales shine

BUSINESSDESK: Wall Street advanced as better-than-expected US retail sales and Citigroup earnings bolstered optimism about the economic outlook, signs that were warmly welcomed hot on the heels of last week's darker mood.

Shares of Citigroup climbed, last up 3.9%, after the bank's third-quarter profit beat expectations. That helped set the tone.

In afternoon trading in New York, the Dow Jones Industrial Average rose 0.67%, while the Standard & Poor's 500 gained 0.58% and the Nasdaq Composite Index advanced 0.34%.

"After big declines last week, we have a strong Citi earnings [report] and positive European news. In the short term, it takes European stress out and allows markets to focus on earnings and the US consumer," Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey, told Reuters.

It appears the American consumer is doing its share of supporting the economy. Retail sales rose 1.1% in September, surpassing expectations, and following on a revised 1.2% increase in August, according to Commerce Department data.

A separate report showed that US business inventories climbed 0.6% in August, less than the 0.8% increase in July.

"This is a good end of [the] third quarter and we have some good momentum to the fourth quarter," Craig Dismuke, an economic strategist at Vining Sparks in Memphis, Tennessee, told Reuters.

Even so, another report showed that an index of manufacturing activity in New York state contracted for a third straight month in October.

Investors are closely monitoring a slew of US earnings with some 84 companies in the S&P 500 scheduled to release results this week. Of the 38 companies in the benchmark index that have reported since October 9, 27 posted earnings that exceeded analyst estimates, according to data compiled by Bloomberg.

Europe's Stoxx 600 Index ended the day with a 0.5% gain on the previous close. National benchmark indexes in Germany, France and the UK rose as well.

Investors welcomed comments from Germany's Angela Merkel that Greece will not be allowed to default. Her comments provide the latest indication that Germany is easing its hardline approach.

"A new haircut is out of the question as far as the German government is concerned," Steffen Seibert, Merkel's chief spokesman, said at a regular news briefing in Berlin today, according to Bloomberg. "We are working on sensible solutions with the Greeks and our European partners."

The euro is due for some strength too. The single currency may strengthen toward $US1.3172 after holding above its 200-day moving average of $US1.2826, according to Bloomberg, citing Credit Suisse Group's analysis of trading patterns.