return a local pointer

struct node
{
  Item item; node *l, *r;
  node(Item x) {item = x; l = 0; r = 0;}
};

typedef node* link;
link max(Item a[], int l, int r)
{
    int m = (l+r)/2;
    link x = new node(a[m]);
    if (l==r) return x; // return a local pointer
    x->l = max(a, l, m);
    x-r = max(a, m+1, r);
    Item u = x->l->item, v = x->r->item;
    if (u>v) x->item = u;
    else x->item=v;

    return x;    // return a local pointer
}

This is a piece of code from "Algorithm in c++" by Robert Sedgewick, page 252, Program 5.19. And in function max(), the returned variable is a pointer which is created inside the function.

In my opinion, returning a local pointer is not allowed in c/c++. So my question is that "is that OK to write a function like this"? I cannot believe such a classic book make mistake like this. Or I misunderstood the principle? Please help. Thanks.