Rally Ends for Wall Street

Profit-takers come in after the market's two-day upswing.
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Updated from 4:22 p.m. EST

Stocks in New York saw their short advance come to an end Thursday, the next-to-last trading day of 2006, as profit-takers decided to pocket some of their recent gains.

The

Dow Jones Industrial Average

slipped 9.05 points, or 0.07%, to 12,501.52. At their worst point of the session, the industrials had been down as many as 32 points. The

S&P 500

lost 2.11 points, or 0.15%, to 1424.73, and the

Nasdaq Composite

was off 5.65 points, or 0.23%, at 2425.57.

On Wednesday, the Dow rallied for the second straight day and rose 102.94 points, or 0.8%, to 12,510.57, its best-ever close. The gains were driven by increases of more than 2% in

Alcoa

(AA) - Get Report

,

Citigroup

(C) - Get Report

and

General Motors

(GM) - Get Report

.

In fact, the bulls had their way during the first two sessions of the holiday-shortened week, as the Dow picked up nearly 170 points, the S&P 16 points and Nasdaq about 30.

"Today we saw some back-and-fill movements after yesterday's run-up," said Paul Nolte, director of investments with Hinsdale Associates. "There looks to be a relatively soft landing with today's economic numbers, but that didn't sway anyone either way. Everyone looks to be squaring up the books before year end."

Volume remained light, with 1.54 billion shares changing hands on the

New York Stock Exchange

. Decliners beat advances by a 9-to-7 margin. Volume on the Nasdaq was roughly 1.27 billion shares, and losers outpaced winners 3 to 2.

Oil futures ended their decline after the Energy Department's weekly inventory report was released. Crude supplies dropped by 8.1 million barrels, while gasoline stocks rose by 3 million barrels. Distillate inventories were higher by 500,000 barrels last week.

The February oil contract rose 19 cents to close at $60.53 a barrel.

Turning to the economy, the Conference Board said that consumer confidence unexpectedly rose in December to 109.0 from 105.3 in November. Economists were expecting a slight dip.

Separately, the National Association of Realtors said U.S. existing home sales rose 0.6% last month to a 6.28 million annual rate, a bigger increase than anticipated. Another report this week showed that new homes were being sold at a yearly pace of about 1.04 million in November. That was up slightly from October, but well below the rate from earlier in the year.

Also on the economic docket, the Chicago Purchasing Managers' index climbed to a reading of 52.4 in December from 49.9 in November. The Labor Department said initial jobless claims rose by 1,000 to 317,000 last week. The less volatile four-week moving average fell by 10,250 to 315,750, the lowest level since early November.

Following the day's economic reports, Treasuries were moving lower. The benchmark 10-year was losing 15/32 in price to yield 4.71% and the 30-year was falling by 27/32, yielding 4.83%. The dollar pared its losses against the world's major currencies.

As was the case in the prior session,

Apple

(AAPL) - Get Report

was under pressure for a matter related to its options practices. This time, the stock fell 0.8% to close at $80.87 after a published report said that CEO Steve Jobs received an options grant that wasn't approved by the board, even though it was supposed to have been.

In M&A news,

Eaton Corp.

(ETN) - Get Report

has agreed to buy AT Holdings, parent of Argo-Tech Corp., for $695 million. Meanwhile,

Alliance Data Systems'

(ADS) - Get Report

Epsilon unit has purchased Abacus, a division of DoubleClick, for $435 million.

Eaton added 37 cents, or 0.5%, to $75.80. Alliance Data rose 72 cents, or 1.2%, to close at $62.72.

Elsewhere, a consortium of

IBM

(IBM) - Get Report

and

Siemens

(SI) - Get Report

won a 10-year IT services contract from the German military worth $9.3 billion. IBM gave back 23 cents, or 0.2%, to $96.97.

Overseas, the Tokyo Nikkei closed nearly unchanged at 17,225, and Hong Kong's Hang Seng rose 1.4% to 20,002. London's FTSE was down 0.1% at 6241, and Frankfurt's Xetra DAX tacked on 0.1% at 6612.