Stocks Post First 2005 Gains

The Dow snaps a six-session slide, but the Nasdaq slips again as early gains fade.
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Updated from 4:04 p.m. EST

It was a belated and tepid Happy New Year for Wall Street.

Stocks closed mostly higher Thursday, posting their first gains of 2005, as the nation's chain stores reported solid December sales and a rise in jobless claims calmed fears of a hawkish

Federal Reserve

.

The

Dow Jones Industrial Average

gained 25.05 points, or 0.2%, to 10,622.88, snapping a six-session, 225-point skid; and the

S&P 500

added 4.15 points, or 0.3%, to 1187.89. The

Nasdaq's

2004 slide stretched to four sessions, as the tech index lost 1.24 points, or 0.06%, to 2090, having briefly regained the 2100 level earlier. The 10-year Treasury bond was up 4/32 in price to yield 4.26%.

Volume on the

NYSE

was 1.57 billion shares, with advancers beating decliners by a ratio of 9 to 7. Volume on the Nasdaq was 2.17 billion shares, with decliners and advancers even.

"Today was a huge day for retailers, which started a positive tone in the market," said Brian Williamson, an equity trader with Boston Company Asset Management. "There's still a lack of conviction right now, which may change, but the move higher is encouraging."

The dollar was higher against the yen and euro for a fifth consecutive session. February crude closed sharply higher, up $2.17 to $45.56 a barrel, on signs OPEC members had followed through on an agreement to cut production in January. The Philadelphia Stock Exhange index rose 1.9% because of the spike.

Investors got some clarity on the holiday retail picture Thursday with the monthly release of chain-store sales reports.

Wal-Mart

(WMT) - Get Report

,

Target

(TGT) - Get Report

and

Kohl's

(KSS) - Get Report

all reported decent same-store growth for the month. Target and Kohl's were forced to lower earnings guidance, however, because of aggressive discounting. Target dropped 5.4% to $48.50 and Kohl's was off 2.2% to $47.02.

Wal-Mart said same-store sales rose by 3% in December, matching prior forecasts but falling short of last year's 4.3% increase. The retail giant expects January same-store sales growth of 2% to 4%. Total sales increased by 13% to $38.4 billion from a year ago. Shares gained 76 cents, or 1.4%, to $54.05.

The big story was specialty clothing retailers, most of which blew away Wall Street comp forecasts and saw their shares rise.

American Eagle

(AEOS)

,

Abercrombie & Fitch

(ANF) - Get Report

,

Hot Topic

(HOTT)

and

Chico's

(CHS) - Get Report

all rose sharply after wiping out sales estimates.

Urban Outfitters

(URBN) - Get Report

also had a big month but saw its shares sink after last year's doubling.

Also falling were

Sears

(S) - Get Report

and

Pier 1

(PIR) - Get Report

, both of which reported disappointing December results. Pier 1 lost 39 cents, or 2.1%, to $18.36, while Sears dropped 50 cents, or 1%, to $49.90.

In economic news, the Labor Department said first-time U.S. unemployment claims jumped by 43,000 to 364,000 last week, the largest increase since March 2002. New claims are at their highest level since September. The less-volatile four-week moving average of new claims rose by 750 to 333,000. The Labor Department will release the December employment report Friday morning. The consensus forecast for nonfarm payrolls is a gain of 175,000, up from the 112,000 increase in November. The unemployment rate is forecast to remain at 5.4%.

"A lot of this week's action is a preamble to the report tomorrow," said Bryan Piskorowski, market analyst with Wachovia Securities. "The big problem is that it never comes in right near consensus, which is why it is a focal point. More emphasis is placed on it now after the Fed's minutes and the hawkish commentary, further putting the job numbers in the spotlight."

Western Wireless

(WWCA)

shares surged Thursday on a report that

Alltel

(AT) - Get Report

is close to a deal to buy the wireless communications company for about $4 billion. Shares gained $4.70, or 15.1%, to $35.70.

Among new research,

American International Group

(AIG) - Get Report

was cut to hold at Deutsche Bank, while

Computer Associates

(CA) - Get Report

was lowered to neutral by Merrill Lynch. Both brokerages cited recent run-ups in the companies' stock prices. AIG rose 11 cents, or 0.1%, to $67.46 while Computer Associates declined 59 cents, or 2%, to $28.75.

Smith Barney said negative broker views on

Alcoa

(AA) - Get Report

are overdone, and that earnings momentum should pick up in 2005. Alcoa added 13 cents, or 0.4%, to $30.38.

TiVo

(TIVO) - Get Report

shares rose on news the company would team with

Microsoft

(MSFT) - Get Report

for a new technology that would allow consumers to view digitally recorded television shows on handheld and portable devices. TiVo rose 39 cents, or 5.8%, to $5.80.

Ten former directors of WorldCom have agreed to pay $54 million to settle charges brought by bondholders in the company's accounting scandal,

The Wall Street Journal

reported Thursday. Of the total, about $18 million would come right from the directors, while liability insurance would cover the remainder. None of the former directors are on the board of

MCI

(MCIP)

, WorldCom's Nasdaq-traded successor company. MCI gained 4 cents, or 0.2%, to $19.41.

National Semiconductor

(NSM)

will cut 550 manufacturing jobs in an effort to streamline its operations. The company also was upgraded by Credit Suisse First Boston. Shares rose 19 cents, or 1.1%, to $17.07, but could not boost the Philadelphia Stock Exchange Semiconductor Index, which fell for the fourth straight day.

Overseas markets closed mostly higher, with London's FTSE 100 rising 0.3% to 4821 and Germany's Xetra DAX gaining 1% to 4300. In Asia, Japan's Nikkei rose 0.5% overnight to 11,492, while Hong Kong's Hang Seng slipped 0.4% to 13,712.