* BJ's buyout report lifts retailers
* Indexes up: Dow 0.4 pct, S&P 0.2 pct, Nasdaq 0.2 pct
* For up-to-the-minute market news see [STXNEWS/US] (Updates to early morning)
By Chuck Mikolajczak
NEW YORK, Dec 29 (Reuters) - U.S. stocks advanced on Wednesday as investors remained bullish about the prospects for equities in 2011, keeping a December rally intact.
The S&P 500 has risen 6.7 percent this month, pushing the benchmark index above levels reached on Sept. 12, 2008, the last trading day before Lehman Brothers collapsed, as improving economic data and a changed political landscape have encouraged risk-taking.
"There is certainly a lot more optimism out there, either founded or not, in terms of stock prices," said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland.
"At the end of the day, most companies have prepared their balance sheets, and they are looking to grow either organically or through acquisitions. The U.S. market is probably seen as a place to find high quality companies right now."
The Dow Jones industrial average <.DJI> gained 40.83 points, or 0.35 percent, to 11,616.37. The Standard & Poor's 500 Index <.SPX> rose 2.66 points, or 0.21 percent, to 1,261.17. The Nasdaq Composite Index <.IXIC> added 4.81 points, or 0.18 percent, to 2,667.69.
Retailers rose as BJ's Wholesale Club Inc
The Morgan Stanley Retail index <.MVR> climbed 1.1 percent, and the S&P Retail index <.RLX> gained 0.6 percent.
Molycorp Inc
Private equity company Blackstone Group LP