Stocks Keep On Climbing

Lower oil prices and another third-quarter GDP surprise push the indices to new highs.
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Updated from 4:02 p.m. EST

Stocks marched higher Wednesday with the

Dow

and

S&P 500

closing at three-and-a-half-year highs for the second session in a row, as falling oil helped sustain an end-of-the-year rally.

The Dow Jones Industrial Average rose 56.46 points, or 0.52%, to 10,815.89, a 42-month high. The S&P 500 gained 4.13 points, or 0.34%, to 1209.58, a 40-month peak. And the

Nasdaq

rose 6.12 points, or 0.28%, to 2157.03, just 3 points shy of its best close of the year.

Trading volume continued to slow ahead of the holiday, with 1.39 billion shares trading on the

New York Stock Exchange

and 1.79 billion changing hands on the Nasdaq. Advancers led decliners by a roughly 3-2 margin on both exchanges.

The 10-year Treasury note fell 9/32 in price to yield 4.21%, while the dollar was lower against the yen and euro.

Oil closed down $1.52 to $44.24 a barrel in regular Nymex trading. The Energy Department said Wednesday that U.S. distillate inventories -- which include heating oil stocks -- rose by 600,000 barrels, while crude inventories increased by 2.1 million barrels in the most recent week.

"The story with oil is definitely the driver," said Ken Tower, chief market strategist with CyberTrader. "Traders aren't looking for any increase in volatility, and are in fact looking for an extension in economic growth."

To that end, the government said the economy grew at a revised 4% annualized rate in the third quarter. The third and final GDP estimate was revised up from 3.9%. A key inflation measure was also revised up 0.1% to 1.4%. A spate of economic reports are due for release Thursday.

"The GDP numbers were positive, and it shows the economy on a decent growth track." said Barry Hyman, equity market strategist with Ehrenkrantz King Nussbaum.

Among movers Wednesday,

Research In Motion

(RIMM)

was down 4.9% on Instinet after reporting a fivefold increase in the third-quarter earnings but issuing lukewarm revenue guidance for the current period. The device maker now sees fourth-quarter earnings of 48 cents to 54 cents a share on sales of $390 million to $410 million. Analysts had been forecasting earnings of 48 cents a share on sales of $412.3 million. RIM fell $3.55, or 4%, to $83.49.

Microsoft

(MSFT) - Get Report

is marginally lower after a European court ordered the software giant to immediately implement business-practice changes that were mandated in an antitrust ruling over the summer. Among other things, Microsoft must start selling a version of Windows that doesn't include its Media Player music and movie program. Shares fell 10 cents, or 0.4%, to $26.97.

The Franklin Raines era is over at

Fannie Mae

(FNM)

, which last night saw the ouster of its two top executives and auditor in the wake of government allegations of accounting missteps. The company said Raines, its CEO, retired, while Chief Financial Officer Timothy Howard resigned, although reports Wednesday suggest both were removed at the behest of the Office of Federal Housing Enterprise Oversight.

According to OFHEO, Fannie is currently undercapitalized after announcing last week it would be forced to restate $9 billion of past earnings. "This capital level places Fannie Mae below its minimum capital requirement and results in a classification of significantly undercapitalized," OFHEO said. "Fannie Mae's critical capital level remains above the required threshold, and Fannie Mae continues to meet its risk-based capital requirement," the regulator said. Shares gained $1.57, or 2.2%, to $71.92.

Qualcomm

(QCOM) - Get Report

raised its first-quarter outlook, saying it expects to earn 26 cents to 27 cents a share, up from its previous forecast of 24 cents to 26 cents a share. The Thomson First Call consensus is 26 cents a share. Qualcomm rose 46 cents, or 1%, to $44.44.

OfficeMax

(OMX)

said late Tuesday that 2004 operating income is expected to be less than previously forecast. The retailer did not provide specific figures, but said the change was due to poor holiday sales. Shares fell 25 cents, or 0.8%, to $30.15.

Pfizer

(PFE) - Get Report

continued to recoup losses after earlier concerns surrounding the future of its Celebrex drug. Shares gained 98 cents, or 3.9%, to $25.95.

Banc of America, citing a sluggish holiday selling season, lowered estimates for several retailers, including

Ann Taylor

(ANN)

,

Gap

(GPS) - Get Report

,

Kohl's

(KSS) - Get Report

,

Saks

(SKS)

,

TJX

(TJX) - Get Report

and

May Department Stores

(MAY)

. The firm did target a few companies it felt were doing well for the season, including

Abercrombie & Fitch

(ANF) - Get Report

and

Chico's

(CHS) - Get Report

.

Overseas markets were mostly higher, with London's FTSE 100 finishing up 1% to 4781 and Germany's Xetra DAX gaining 0.7% to 4244. In Asia, Japan's Nikkei rose 0.8% overnight to 11,209, while Hong Kong's Hang Seng fell 0.2% to 14,151.

Stocks staged a moderate-volume rally on Tuesday, with the Dow jumping 98 points to 10,759 -- its highest level since June 2001. At about 2.9%, the Dow's 2004 gain is dwarfed by that of the S&P 500, which added 11 points Wednesday to 1205 and is now up 8% for the year. The Nasdaq Composite rose 23 points to 2151 Tuesday, its biggest one-day jump since Dec. 1.