US stocks rally

Wall Street resumed its fourth-quarter rally today, pushing the Dow Jones industrials to its first close above 12,400 after a series of strong company earnings and a drop in unemployment claims revived investors’ confidence in the economy.

The market, which stalled earlier this week on interest rate and economic concerns, was reinvigorated by robust quarterly profits from Bear Stearns, Lehman Brothers Holdings, and Costco Wholesale Corporation, as well as a healthy outlooks from Citigroup and Honeywell International.

Wall Street was also boosted by the Labour Department’s report that the number of Americans filing for unemployment benefits plunged for a second straight week. The data suggested the US economy won’t cool as quickly as some investors feared.

“As far as I can tell, consumers keep spending as long as unemployment is low,” said Ed Peters, chief investment officer at PanAgora Asset Management.

Airline stocks were pummelled by rising oil prices, after the Organisation of Petroleum Exporting Countries said it was keeping its oil production target stable for now, but making cuts in February.

Overall, though, the stock market was unmoved by the possibility of higher fuel prices dampening consumer spending and hiking companies’ materials costs.

The Dow rose 99.26, or 0.81%, to a new closing record of 12,416.76, after hitting a new trading high of 12,431.26 earlier in the session. The Dow’s last record close of 12,342.56 was reached on November 17.

Broader stock indicators also rose sharply. The Standard & Poor’s 500 index was up 12.28, or 0.87%, at 1,425.49, after reaching a six-year trading high of 1,427.23. The technology-laden Nasdaq composite index rose 21.44, or 0.88%, to 2,453.85.

Bond prices fell again Thursday, with the yield on the benchmark 10-year Treasury note rising to 4.59% from 4.58% late Wednesday. The dollar rose against other major currencies, and gold prices rose as well.

Oil prices shot higher after the Opec announcement. Crude oil for January soared $1.13 to $62.50 a barrel on the New York Mercantile Exchange.

The stock market had been moving cautiously over the past week, inching up and then pulling back after the Federal Reserve left interest rates steady on Tuesday and offered no hints that it might start lowering them.

But today’s positive corporate and economic news sparked a resumption of stock buying, extending the Dow’s upward climb. The Dow reached record territory past 12,000 for the first time in nearly seven years this fall.

“We’re in that Santa Claus rally time, and there’s nothing to stop it today,” said Arthur Hogan, chief market analyst at Jefferies & Co. He said the market seems to be looking past rising fuel prices.

Although stocks have bounced back, the economic picture remained mixed, analysts said.

Investors will be closely watching tomorrow’s release of consumer price figures for November, which could provide clues to the Fed’s plan for next year.

The tech sector got a boost from Ciena’s robust profits and a forecast by Advanced Micro Devices of cost savings from its acquisition of ATI Technologies. Ciena, which makes equipment for fibre optic communication networks, rose 2.87, or 11.5%, to 27.83, and Advanced Micro gained 2.54, or 12.6%, to 22.71.

Investors were also cheered by Costco, which said its profit in the latest quarter rose 10%. The US’s largest wholesale club operator rose 97 cents to 54.11.

Bear Stearns climbed 4.07, or 2.6%, to 159.96 on its strong financial results. Lehman Brothers slipped 29 cents to 76.08, as investors were slightly disappointed that the firm did not produce record fourth-quarter profits, as its rivals Bear Stearns and Goldman Sachs Group did. Goldman reported its results next Tuesday.

Meanwhile, Citigroup rose 79 cents to 53.11, after the largest US financial institution’s chief executive unveiled plans to improve profitability in 2007. Diversified manufacturer Honeywell rose 83 cents, or 2 percent, to 42.69, after saying it expects a 5% rise in sales and double-digit earnings growth next year.

Higher energy prices were a boon to oil companies’ stocks, pushing Chevron up 1.57, or 2.1%, to 75.97; ConocoPhillips up 2.07, or 2.9%, to 73.07; and ExxonMobil Corp. up 1.37 to 78.73.

But airlines buckled under the prospect of higher fuel costs. Continental Airlines fell 42 cents to 44.34; Southwest Airlines fell 19 cents to 15.75; and UAL, parent company of United Airlines, fell 69 cents to 44.55.

The Russell 2000 index of smaller companies was up 5.47, or 0.69%, at 794.22.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume totalled 1.57 billion shares, compared with 1.47 billion on Wednesday.