January's sales increase followed a 0.4 percent decline in December and was contrary to Wall Street analysts' forecasts for a 0.2 percent decline. The surprise sales rise caused stock futures to jump on hopes it meant the United States had a better chance of skirting a recession.

Prices for U.S. debt securities fell while the dollar's value strengthened against other major currencies.

Excluding autos, January sales still rose 0.3 percent, reversing a 0.3 percent decline in December sales. Wall Street analysts were expecting a 0.2 percent gain in sales excluding autos.

"The data is clearly a surprise to the upside," said Omer Esiner, a market analyst with Ruesch International in Washington, D.C. "In the near term, it does ease some recession concerns."

Despite the higher headline number for sales, there were declines in many categories that implied consumer spending was being pinched. Furniture sales fell 0.5 percent in January, building material sales were down 1.7 percent and department store sales declined by 1.1 percent.

Many analysts think the slowing U.S. economy faces increasing risks of tumbling into recession and are closely watching for signs that consumers, who fuel 70 percent of national economic activity, will keep scaling back spending.

The U.S. Justice Department said on Friday it will not appeal the dismissal of its indictment of Norwegian shipping group Stolt-Nielsen in a price fixing case.

Earlier this month, a Pennsylvania court threw out a criminal indictment against the company and two of its executives.

Judge Bruce Kauffman of the U.S. District Court for the Eastern District of Pennsylvania, who tossed out the indictment, said Stolt-Nielsen had cooperated with the Justice Department to dismantle illegal collusion among three long-haul carriers in exchange for a promised amnesty for prosecution.

The nation's shoppers -- taking advantage of deep discounts and expanded hours -- jammed stores over the last weekend before Christmas to try to grab a hard-to-find Wii or scoop up bargains on other items. But the spending surge may not be enough to offset what is shaping up to be a mediocre December for some retailers.

Based on early reports on Sunday, mall operators including Macerich Co. said they were pleased with the spending spree over the weekend, but they were still counting on Christmas Eve and post-Christmas business to meet holiday sales goals in what has turned out to be a nail biter of a season.

Meanwhile, even as shoppers continued to snap up flat-screen TVs, video game software and other gadgets, benefiting stores like Best Buy Co., the apparel business remains challenging, analysts said.

Ed Schmults, chief executive of toy merchant FAO Schwarz, which operates stores in Chicago and New York, said Sunday that pre-Christmas business is below expectations despite a sales surge this weekend.

"It's almost kind of worth waiting and shifting through the hustle and bustle," said Carly Moore, of Chicago, who was heading to Macy's on the city's State Street shopping corridor to scoop up some discounted clothing. But she was still frustrated that she couldn't find Nintendo's Wii game console, after trying at least five stores.

Valerie Glodowski of Stevens Point, Wis., who was with her boyfriend at Wisconsin's Wausau Center Mall, said she started holiday shopping two weeks ago and waited until the last weekend to finish out of sheer laziness.

"I am just winging it," she said.

Many merchants, which had struggled through a sluggish December after a strong start to the season, are counting even more on the final days before Christmas to make their holiday goals. With the three days prior to Christmas accounting for as much as 15 percent of holiday sales, there's a lot of business left on the table.

Macy's Inc. is keeping several of its stores in the New York metropolitan area, including its flagship store in Herald Square, open until 6 p.m. on Christmas Eve. About 1,000 of Sears Holdings Corp.'s 1,387 Kmart stores are open for 64 hours straight, beginning at 6 a.m. Saturday and ending at 10 p.m. on Dec. 24, for the first time since 2002.

With Christmas falling on a Tuesday, shoppers were enticed to wait even longer this season to finish their holiday shopping. A challenging economy -- higher gas prices and a housing slump -- also made some shoppers hold off until the final days before the holiday. Retailers routinely discount items deeper as Christmas draws nearer.

"The gas prices and car insurance ... is up. I would say I'm spending less and worrying more about it," said Sondra Newton, of Warren, Mich., who was at Oakland Mall in Troy, Mich., a suburb outside of Detroit on Friday. "I used to just take their (her children's) list and get the top ones on it. Now I have to think about 'what can I get at the best deal.'"

Nevertheless, Michael P. Niemira, chief economist at International Council of Shopping Centers, is sticking with his December forecast for a 1.5 percent gain in same-store sales, or sales at stores opened at least a year. That would mean same-stores sales for the November-December period would be up 2.5 percent from a year ago.

"I think when the dust settles, stores will have met expectations, though they are modest," said Bill Martin, co-founder of ShopperTrak RCT Corp., which tracks total sales at more than 50,000 retail outlets. He said he is still sticking with his 3.6 percent forecast for the November and December period, though he added, "some retailers will do OK, and others won't."

ShopperTrak is expected to release total sales for the week ended Saturday late on Monday.

The sale in small markets will leave News Corp. with 27 stations in major markets including New York, Boston and Los Angeles.

The media conglomerate, which owns the New York Post, a controlling stake in BSkyB satellite TV service, and 20th Century Fox movie studio, recently closed a $5.6 billion deal to buy the Wall Street Journal publisher, Dow Jones.

The sale will probably be completed in the third quarter, News Corp. said in a statement Saturday. The purchase will help Oak Hill, the buyout firm founded two years ago by Robert Bass, a Texas oil billionaire, create a broader U.S. network. In May it paid $575 million to acquire stations in Oklahoma, Pennsylvania, Iowa and Arkansas from The New York Times Co.

"It is part of News Corp.'s strategic decision to shed low-growth, noncore assets," said Richard Dorfman, managing director of the investment firm Richard Alan.

The days leading up to Christmas -- which in recent years have been positive for stocks -- will bring readings on the housing market, minutes from the Federal Reserve's meeting last month, and earnings reports including results from major retailers. The data should keep investors busy as they stare down tumbling home prices, billions of dollars of losses at banks that made losing bets on subprime mortgages, and crude oil flirting with $100 a barrel.

Though the end of the year usually sparks buying, recent developments have made a December rally look like a pipe dream to many market participants, who are simply hoping stocks can hold onto their gains. The Dow Jones industrial average is up 5.73 percent year-to-date, the Standard & Poor's 500 index is up 2.85 percent, and the Nasdaq composite index is up 9.19 percent.

At this point, Wall Street expects the U.S. housing market to keep wilting through next year, and perhaps into 2009. It also assumes financial institutions will be taking another giant round of writedowns during the fourth quarter, one that may be larger than the third quarter's approximately $45 billion in credit-related losses.

What investors remain unsure of is how long it will take the Wall Street banks to bounce back from their losses, and if consumers and the broader economy will survive the worst housing market in decades.

Last week, investors sent stocks higher and lower as they wrestled with uncertainty. The Dow finished last week 1.03 percent; the S&P 500 index ended 0.35 percent, and the Nasdaq finished 0.35 percent.