- The Washington Times - Friday, January 6, 2006

NEW YORK (AP) — Stocks managed to extend their New Year’s rally to a third session yesterday, edging higher in erratic trading as the tech sector rebounded on bullish news from chip maker Xilinx Inc.

The day’s fluctuations signaled that investors wanted to catch their breath after a strong start to the year. The Dow Jones Industrial Average gained more than 160 points the previous two sessions, and the Standard & Poor’s 500 Index reached a 4-year high Wednesday.

Some strategists expect the advance to continue.

“It still feels like people are thinking that stocks are still cheap relative to bonds,” said Phil Schlakman, head of global sales trading at JPMorgan Private Bank. “At this moment, sentiment still feels good, and I think there’s room for stocks to rally further.”

The Dow rose 2, or .02 percent, to 10,882.15.

Broader stock indicators closed higher. The S&P; 500 rose .02, or virtually unchanged, to 1,273.48, and the Nasdaq Composite Index rose 13.41, or .59 percent, to 2,276.87.

Bonds fell slightly, with the yield on the 10-year Treasury note at 4.36, up from 4.35 Wednesday. The dollar rose against most major currencies, while gold prices lost ground.

Strong economic news failed to move stocks much. The Institute for Supply Management’s index of service-sector activity came in at 59.8 for the month, topping the 59 reading forecast on Wall Street as well as November’s 58.5 reading. In addition, the Labor Department reported that first-time claims fell 35,000 to 291,000 last week, a five-year low.

The big debate for the year: Whether stocks are cheap or expensive. Price-to-earnings ratios have fallen as stock prices stayed still although corporate earnings were strong. Still, looking at trailing earnings, the price-to-earnings ratio for the S&P; 500 is still higher than historic norms, according to Merrill Lynch & Co.

Crude-oil prices slipped to $62.79 a barrel, down 63 cents.

Wall Street punished retailers, although overall sales were modestly higher. Wal-Mart Stores Inc. fell 63 cents to $45.69 after reporting that same-store sales rose just 2.2 percent in December.

Target Corp. fell 16 cents to $54.49 after posting a 4.7 percent same-store sales increase, slightly better than Wall Street’s forecasts. Costco Wholesale Corp. fell 30 cents to $49.78. Sales at the chain increased 7 percent, but international sales increases outpaced those in its U.S. stores.

Tech stocks rallied as programmable chip maker Xilinx raised its third-quarter revenue forecasts thanks to strong global sales. Xilinx rose $1.62 to $28.55, while fellow chip makers Intel Corp. rose 36 cents to $26.27 and Advanced Micro Devices Inc. rose $1.12 to $33.68.

Google Inc. rose $6 to $451.24 after the Wall Street Journal reported the company plans to announce an agreement to sell video downloads from the National Basketball Association and CBS, a direct challenge to Apple Computer Inc.’s video sales for IPods. Apple fell 59 cents to $74.38 on the news.

The Russell 2000 Index of smaller companies rose 2.52, or 0.37 percent, to 691.77.

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