NEW YORK (CNNMoney.com) - Stocks rose for the second-straight session Thursday after several strong earnings reports in the technology sector propelled the Nasdaq and spurred renewed optimism in a year-end rally.

A tame inflation reading that sparked a bond market rally, driving long-term interest rates lower, also helped stocks.

The Dow Jones industrial average (up 55.71 to 10,889.44, Charts) added 0.5 percent and the broader S&P 500 index (up 5.33 to 1,268.12, Charts) added 0.4 percent at the close of trading.

The Nasdaq composite (up 14.83 to 2,246.49, Charts) gained 0.7 percent.

Thursday's gains left the Dow up about 1.0 percent and the S&P up about 4.6 percent for the year, with five sessions left in 2005. The Nasdaq has gained about 3.3 percent year-to-date.

Stocks got an additional boost Thursday after a New York state mediator said transit union leaders agreed to direct their striking members to return to work while talks resumed to settle the first subway and bus strike in New York City in 25 years.

The strike has made commuting tough for thousands of investors and brokers as well as millions of other workers in New York.

Meanwhile, investors were watching and waiting to see if Wall Street would mount its traditional year-end rally.

Some market watchers are saying the so-called "Santa Claus" rally may have come and gone with the market's solid gains in November.

"I think we're going to edge our way higher but I don't think it's going to be a barn burning," said Hugh Johnson, chairman of asset management company Johnson Illington Advisors.

"I don't think we'll be able to shake worries about higher interest rates, and that will keep the market in check," he said calling it a "year end rally without the eggnog."

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

After the closing bell, Amkor Technology (down $0.16 to $6.18, Research) said that John Boruch, the company's president and chief operating officer will retire as a director and officer at the end of the year, sending shares lower in after hours trading.

Shares of Applied Signal Technology (Research) surged in after-hours trade after the company posted fourth-quarter results ahead of Wall Street's estimates.

But shares of Solectron (Research) tumbled more than 4 percent on Inet after the contract electronics manufacturer posted a lower first -quarter profit.

During regular trading, shares of Red Hat (up $1.24 to $27.80, Research) jumped over 4.5 percent after the Linux software distributor reported sales above Wall Street's estimates.

Research in Motion (up $6.54 to $68.30, Research) and Tibco Software (up $0.54 to $7.84, Research) also posted better-than-expected profit, sending shares up 11 percent and 7.5 percent respectively.

But Micron Technology (down $0.50 to $13.64, Research) said its first-quarter profit plunged 60 percent, sending its shares down 3.5 percent.

In other earnings news, shares of ConAgra Foods (down $0.34 to $20.60, Research) slumped over 1.5 percent after the company posted a 32 percent drop in second-quarter profit on disappointing sales and higher fuel costs.

Bed Bath & Beyond (down $4.97 to $36.27, Research) said third-quarter profit rose 10.4 percent, but its sales fell short of Wall Street expectations and it provided a disappointing outlook for its fourth quarter. The stock sank 12 percent.

Humana (up $6.97 to $55.29, Research) reaffirmed its earnings outlook for 2006, sending shares of the health insurer up around 15 percent.

Finish Line (Research) stock sank 1.5 percent after the athletic apparel retailer said its third-quarter profit dropped 62 percent despite a rise in sales.

And Russell (down $1.14 to $13.58, Research) warned that 2005 earnings will come in below its prior forecast, citing lower-than-expected sales and costs related to supply issues. Shares of the athletic clothing maker tumbled 7.5 percent.

On the mergers-and-acquisitions front, shares of Best Buy (down $0.20 to $43.25, Research) edged higher on Inet after the company said it agreed to acquire Pacific Sales Kitchen and Bath Centers for $410 million.

Shares of Albertsons (down $0.82 to $23.28, Research) sank 3.5 percent in regular trade on fears that the grocery chain's plans to sell itself are in jeopardy.

Private equity firm Apax Partners is reportedly in the final stages of a deal to buy Tommy Hilfiger (down $0.36 to $16.00, Research), sending shares of the fashion company down over 2 percent.

Shares of AtheroGenics (up $3.24 to $19.74, Research) jumped 20 percent after the biotech firm signed a heart drug deal worth up to $1 billion with AstraZeneca (up $0.35 to $48.40, Research).

Maytag (up $0.33 to $19.10, Research) shares rose nearly 2 percent after the appliance maker confirmed in a statement that shareholders approved the proposed buyout by larger rival Whirlpool (up $0.29 to $84.17, Research).

Light sweet crude oil for February delivery settled down 28 cents to $58.28 a barrel on the New York Mercantile Exchange.

In economic news, consumer spending rose 0.3 percent in November but a big drop in energy costs and scant inflation elsewhere boosted shoppers' buying power even more sharply, the Commerce Department said. The report contained what was considered a tame reading on inflationary pressures on prices.

The Index of Leading Indicators, which is supposed to forecast economic trends up to six months ahead, rose for the second straight month, climbing to 0.5 percent after rising a revised 1 percent in October, the Conference Board said.

Weekly jobless claims fell more than forecasts.

Reports on Michigan sentiment, new durable goods orders and new home sales are all slated for Friday.

In the bond market, Treasury prices jumped following the economic reports, lowering the yield on the 10-year note to 4.43 percent from 4.49 percent late Wednesday. Bond prices and yields move in opposite directions.

The dollar fell versus the euro and yen.

COMEX gold for February delivery jumped back above $500, rising $8.30 to $503.30 an ounce.