* Netflix shares slide after Morgan Stanley downgrade
* U.S. trade deficit smallest in four years
* German unemployment unexpectedly falls
* Indexes up: Dow 0.7 pct, S&P 0.6 pct, Nasdaq 0.7 pct
By Rodrigo Campos
NEW YORK, Jan 7 A declining U.S. trade deficit and upbeat German data enticed buyers back into stocks on Tuesday after three days of losses on the S&P 500.
The latest evidence of strengthening economic fundamentals in the United States came in the form of the smallest trade deficit in four years in November, as exports hit a record high and weak oil prices restrained import growth.
German unemployment unexpectedly fell in December on a seasonally-adjusted basis, bolstering hopes that domestic consumption could lift growth in Europe's biggest economy.
"For the first days of the year there's been profit taking on no news. Today we had some good news again so this momentum building up for the last five years is going to continue to pull the market higher," said Uri Landesman, president of Platinum Partners, a New York-based multi-strategy hedge fund.
"People realize how much the market has been up, so there's the desire to take profits," he said, but it is offset by "incredible upward momentum."
The Dow Jones industrial average rose 116.06 points or 0.71 percent, to 16,541.16, the S&P 500 gained 10.98 points or 0.6 percent, to 1,837.75 and the Nasdaq Composite added 29.901 points or 0.73 percent, to 4,143.582.
Economic activity may be hurt by a polar vortex - strong upper-level winds in the Northern hemisphere that normally hover over the polar region - that has been pushed south to envelop a large part of the United States.
Morgan Stanley cut its rating on Netflix shares to "underweight." They fell 4.5 percent to $343.52.
Intel showed off wearable computing devices on Monday, including a smart headset and ear buds that monitor the wearer's heart rate, as the world's largest chipmaker tries to get back on track after missing out on smartphones. Intel shares rose 0.8 percent to $25.68.
Shares of Neurocrine Biosciences soared 60.5 percent to $15.66 a day after it said its movement disorder drug showed a reduction in symptoms compared with a placebo in a mid-stage study.
Shares of therapeutic delivery systems provider Stereotaxis jumped 21.8 percent to $4.87 following completion of a clinical trial.
Janet Yellen made history on Monday as the U.S. Senate confirmed her as the first woman to lead the U.S. Federal Reserve in the central bank's 100-year history.
Eric Rosengren, president of the Federal Reserve Bank of Boston, said he expects gross domestic product growth of about 3 percent this year and added that low inflation is a concern.