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Several strong earnings reports in the technology sector propelled the Nasdaq and spurred renewed optimism in a year-end rally. .Stocks closed at their best levels of the session, aided by data showing tame inflation, with Dow components Caterpillar and American International Group marked higher after being named sector favorites by research firms. Today’s gains left the Dow up about 1% and the S&P up about 4.6% for the year, with five sessions left in 2005. The Nasdaq has gained about 3.3% year-to-date.

Today, the Dow Jones industrial average closed up 55.71 or 0.5% to 10,889.44, the broader Standard & Poor’s 500 index closed up 5.33 or 0.4% to 1,268.12, and the Nasdaq composite index finished up 14.83 or 0.7% to 2,246.49.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than 20 to 12 on volume of 1.3 billion shares. On the Nasdaq advancers beat decliners by a margin of about 18 to 11 as 1.5 billion shares changed hands.

In November, consumer spending rose 0.3% and the reading on inflationary pressures on prices has been tame. Leading indicators that forecast economic trends up to six months ahead, climbed to 0.5% after rising a revised 1% in October. Additionally, the weekly jobless claims also fell more than forecasts.

Amongst gainers, Red Hat jumped over 4.5% up $1.24 to $27.80, after reporting sales above Wall Street’s estimates, Research in Motion closed up $6.54 or 11% to $68.30, and Tibco Software closed up $0.54 or 7.5% to $7.84, on better-than-expected profit. Shares of Humana closed up $6.97 or approx 15% to $55.29, on reaffirming its earnings outlook for 2006.

Amongst losers, Micron Technologies lost $0.50 or 3.5% to $13.64, on reports of 60% plunge in profits. ConAgra Foods closed down $0.34 or 1.5% to $20.60, on a 32% drop in second quarter profits. Bed Bath and Beyond lost $4.97 or 12% to $36.27, on a disappointing outlook for the fourth quarter. Finish Line sank 1.5% on reporting a 62% drop in third-quarter profits. Russell closed down $1.14 or 7.5% to $13.58, on citing lower-than-expected sales.

Apax Partners is reportedly in the final stages of a deal to buy Tommy Hilfiger which lost over 2% to close down $0.36 to $16.00. Shares of AtheruGenics closed up $3.24 or 20% to $19.74, after it signed a heart drug deal worth up to $1 billion with AstraZenca which closed up $0.35 to $48.40. Shares of Maytag closed up $0.33 or almost 2% to $19.10, on news of approval to buy Whirlpool which closed up $0.29 to $84.17.

Light sweet crude oil for February delivery settled down 28 cents to $58.28 a barrel on the New York Mercantile Exchange. The January natural-gas contract closed down $1.35 at $12.92 per million BTU on news that U.S. gas inventories declined 162 billion cubic feet in the latest week, although supplies remained above their five-year average.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter