Wall Street's December rally resumes

Investors resumed their December rally today, looking past higher oil prices and focusing instead on building up their portfolios before year’s end.

A higher US dollar and a brokerage upgrade of General Electric Co. added momentum to the buying.

Although a barrel of light crude oil closed at 41.94 dollars, up 48 cents, on the New York Mercantile Exchange, Wall Street appeared unconcerned. Oil futures had vacillated between 41 dollars and 42 dollars per barrel after the Energy Department said fuel inventories were higher than Wall Street expected.

Investors were encouraged as the dollar gained against the Japanese yen after Japan’s government reported slower-than-expected economic growth in its most recent quarter. Analysts had been concerned that the weak dollar could lead to a drop in foreign investment.

Analysts said investors were more interested in end-of-the-year window dressing in their portfolios.

“There’s just a ton of money coming into the market, and some of the usual year-end shuffling, and it’s ignoring the day-to-day ups and downs on oil and everything else,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. “I think the pullback we had over the past few days is good, because it’ll help us move higher before the year’s out.”

The Dow Jones industrial average rose 53.65, or 0.51%, to 10,494.23. The Dow had fallen more than 150 points over the previous two sessions.

Broader stock indicators were moderately higher. The Standard & Poor’s 500 index was up 5.74, or 0.49%, at 1,182.81, and the Nasdaq composite index gained 11.45, or 0.54%, to 2,126.11.

Analysts reported more money flowing into mutual funds and other investments thanks to the stock rally that started in November. The extra money should push stock prices up before the end of the year, so long as oil prices stay relatively low and there are no negative surprises in earnings forecasts or economic data.

“I’ve been saying for the past half a year that things would pick up after the election, and they did. I still think that works, even with what we’ve seen this week,” said Brian Bruce, director of global investments, PanAgora Asset Management Inc. in Boston.

“The natural direction at this point for the rest of the year is up, assuming that you don’t get some unknown factor that comes in and sends it the other direction for a few days.”

Despite a disappointing earnings forecast, Merck & Co. made strong gains Wednesday. The drug maker warned that its 2005 profits would be lower than analysts expected due to the withdrawal of its Vioxx arthritis drug from the market earlier this year. However, the forecast could have been worse, analysts said, and Merck rose 80 cents to 28.69 dollars as it reaffirmed its 2004 earnings targets.

General Electric, another Dow component, climbed 40 cents to 35.71 dollars after analysts at Lehman Brothers upgraded the company’s stock to “overweight” from “equal-weight,” citing the potential for double-digit earnings growth in 2005.

Texas Instruments Inc. lost 96 cents to 24.05 dollars after it narrowed its 2005 earnings and revenue forecasts, which still fall within Wall Street’s estimates, but said 2004 earnings remained on target.

IBM Corp. confirmed the sale of its personal computer business to Chinese PC giant Lenovo for 1.75 billion dollars, part of IBM’s shift in focus away from hardware and toward more profitable software, service and consulting businesses. IBM was up 55 cents at 96.65 dollars.

US computer makers were mixed on the news, though analysts believed it would take Lenovo time to penetrate the US market. Dell Inc. gained 55 cents to 41.86dollars, while Hewlett-Packard Co. fell 6 cents to 21.02 dollars.

Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where volume was moderate.

The Russell 2000 index of smaller companies was up 5.65, or 0.9%, at 631.15.