Stocks rose Wednesday as signs of better-than-expected holiday sales at key retailers such as Wal-Mart and Yahoo! allowed investors to feel a little more optimistic about consumer spending and in turn, the economy.

The Dow Jones industrial average rose 52.80 points, or 0.53 percent, to 10,088.14, ending well off an earlier gain of more than 1.3 percent. The broader Standard & Poor's 500 Index rose 4.71 points, or 0.41 percent, to 1,149.36. The technology-packed Nasdaq Composite Index finished up 16.22 points, or 0.83 percent, to 1,960.70, after rising more than 2 percent earlier.

"The consumer has held up great and it's beginning to look like a recovery will come sooner than people expected,'' said David Straus, who helps manage $80 million for Johnston Lemon Asset Management. "We're getting signs things have bottomed out in the economy and people are thinking 'stocks are cheaper here and I'd better start moving in.'''

A day-long rally lost steam shortly before the closing bell, however, after reports that al-Jazeera satellite television broadcast a video tape showing Usama bin Laden making new comments on the Sept. 11 attacks he is suspected of masterminding.

"This was a slow volume day to begin with and the news that there is this mysterious tape was enough to rock the market,'' said Peter Coolidge, senior equity trader at Brean Murray & Co. ''It might turn out to be a non-event, but it shows the market is still jittery as far as geo-political situations are going.''

Only 790.14 million shares changed hands on the Big Board, compared with November's average daily volume of 1.27 billion, as portfolio managers meandered back into the office after the Christmas holiday on Tuesday and a half-day session on Monday. Many opted to take a few extra days off this week -- the last trading week of 2001 -- and analyst research and company news is also expected to be light.

Internet media company Yahoo gained 84 cents to $17.51 after saying more consumers flocked to its hosted Web sites from Nov. 23 to Dec. 24 than in the same period last year. Yahoo! said holiday shopping sales at its shopping Web sites jumped 86 percent this year, an early sign of strength.

Investors are sensitive to consumer spending since it underpins about two-thirds of the nation's economy. Other online shopping sites to gain included bookseller Amazon.com Inc., which rose $1.27 to $11.10, and Internet auctioneer eBay Inc., which advanced $2.53 to $66.34.

Wal-Mart climbed $1.02 to $58.15, boosting the Dow. The world's largest retailer said December sales at stores open at least a year would be above an earlier forecast, as shoppers scoured holiday bargains.

``Investors are a little more upbeat as we head toward 2002,'' said Hugh Johnson, chief investment officer at First Albany Corp. ``The case for a recovery in the economy and earnings is getting better with every passing day. Although this will be the second successive year that we have had a decline in the stock market, the chances that we will have a third successive decline in 2002 are pretty small.''

Chip titan Intel Corp. and other semiconductor stocks, which often rebound ahead of an economic recovery, helped push the market higher.

Oil shares, including Exxon Mobil Corp., joined the upward trend on expectations the Organization of the Petroleum Exporting Countries (OPEC) will announce hefty output cuts this week, a move that could push oil prices higher.

While analysts are expecting gains in 2002 after two dismal years for stocks, they are debating whether a correction is on the horizon after this year's late rally. The Standard & Poor's 500 has jumped almost 20 percent since the market hit three-year lows on Sept. 21. Companies may post the worst earnings drop of the year when the fourth-quarter earnings season heats up in January.

Among other retailers, Tiffany & Co. rose 98 cents to $31.38 after investment firm UBS Warburg raised its 12-month price target on the upscale jeweler by 11 percent, saying the share price is set to rebound after a year of bad news.

Zale Corp. rose 78 cents to $40.75 after investment bank Goldman Sachs raised its investment rating and earnings estimates for the nation's biggest jewelry retailer to "market outperform'' from "market perform,'' crediting better-than-expected holiday sales and an early turnaround.

"I think retailers are producing some better results than perhaps the Street might have expected,'' said Phil Orlando, chief investment officer of Value Line Asset Management, which oversees $6 billion. "Let's not kid ourselves, this is probably going to be the worst retail season collectively in a decade. But it could have been a lot worse given the tragedy that befell this country on Sept. 11.''

Investors say that retailers' profits this quarter will be tempered by sales that chopped prices by as much as 75 percent, squeezing margins. They also say spending is likely to fall off after the holiday rush.

AT&T Wireless Services Inc. ranked as one of the most active stocks on the Big Board and rose 59 cents to $13.88 after saying former parent AT&T Corp. had sold off its remaining equity stake in the No. 3 U.S. wireless telephone company.

Intel climbed 27 cents to $32.29. Chip stocks are among the first sectors to gain ahead of an economic recovery and some investors pegged Wednesday's gain to optimism profits will rebound along with the economy.

Exxon Mobil rose 60 cents to $39.60, helping boost the blue-chip Dow. OPEC oil exporters this week will announce output cuts of 1.5 million barrels a day after getting satisfactory commitments from rival independent producers to join the curbs, Saudi Oil Minister Ali al-Naimi said.

Some investors say they are wary of putting more cash into stocks until they see evidence profits have started to recover.

S&P 500 companies posted a 21.6 percent tumble in profits for the third quarter, marking the biggest drop in earnings since the last recession of 1991, according to Thomson Financial/First Call. Analysts are forecasting a drop of 21.5 percent in the fourth quarter, but the research firm believes that number could widen to 22 percent.

Winners trounced losers by a ratio of 2-to-1 on the New York Stock Exchange and 3 to 2 on the Nasdaq.

The Russell 2000 index rose 4.38 to 490.19.

Overseas, Japan's Nikkei stock average slipped 0.6 percent. Britain's FT-SE 100, France's CAC-40 and Germany's DAX index were closed for a holiday.

Reuters and the Associated Press contributed to this report.