Tech rally leads the way

NEW YORK (CNNMoney.com) -- Falling oil prices and a renewed wave of interest in technology propelled the Nasdaq Thursday afternoon and helped the Dow and S&P 500 erase losses.

The Nasdaq (up 29.03 to 2,452.19, Charts) composite gained 1.2 percent with roughly 45 minutes left in the session, thanks to strength in a variety of technology shares.

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The Dow Jones industrial average (up 12.34 to 12,486.86, Charts) and the broader S&P 500 (up 2.14 to 1,418.77, Charts) index both saw small gains. The blue-chip indicators were unable to find much momentum amid the morning's soft economic reports and a string of disappointing December retail sales reports.

Another steep decline in oil prices helped most of the market but sent oil stocks tumbling.

A variety of technology sectors gained, with computer hardware and software and networking all participating. The influential semiconductor sector bounced, too, thanks to a rally in Intel shares.

After the big run in the second half of 2006, investors are looking for relative bargains in early 2007, and, to some people, the tech sector seems to represent that, said Ron Kiddoo, chief investment officer at Cozad Asset Management.

"The techs have been hit recently, relative to other sectors, and some people are looking for them to move to the forefront again," he said.

Even in last year's rally, the tech-fueled Nasdaq gained just 9.5 percent versus an advance of nearly 14 percent for the S&P 500 and more than 16 percent for the Dow.

Intel (up $0.87 to $21.22, Charts) jumped after Bank of America raised its first-quarter and fiscal-year 2007 earnings per share estimates on the chipmaker, Briefing.com reported, citing better momentum in notebooks and servers.

Intel was the Dow 30's worst-performing component in 2006, falling more than 18 percent.

Apple Computer (up $1.65 to $85.45, Charts), Dell (up $0.77 to $26.26, Charts), eBay (up $1.24 to $31.41, Charts) and Qualcomm (up $1.54 to $39.00, Charts) were among the other tech gainers lifting the Nasdaq.

Factory orders rose 0.9 percent in November, the government reported Thursday morning, versus forecasts for a rise of 1.4 percent. Orders fell a revised 4.5 percent in October.

The Institute for Supply Management's index on the services sector fell to 57.1 in December from 58.9 in November. Economists thought it would fall to 57.

The two reports served to add to recent concerns that the economy is slowing more than has been expected. Such worries were in play Wednesday as well, the first trading day of 2007.

Stocks gave up a rally Wednesday following the afternoon release of the minutes from the last Fed policy meeting. The minutes showed the bankers remain concerned about the pace of core inflation and the economic slowdown - and they may not cut interest rates any time soon.

The next big economic news for Wall Streeters will be Friday's December employment report.

Market participants also eyed a mixed take on December sales at the nation's retailers, with apparel chains suffering in response to unusually mild weather and competition from large discounters like Wal-Mart Stores (up $0.38 to $47.93, Charts).

Wal-Mart posted a better than expected gain of 1.6 percent in stores open a year or more, a figure also known as same-store sales. Wal-Mart shares were little changed.

Wholesale operator Costco (up $1.14 to $53.98, Charts) also reported stronger than expected sales growth. Shares rose more than 2 percent.

On the downside, teen clothing seller Hot Topic (down $2.44 to $11.10, Charts) reported a steeper than expected decline in the month, sending shares much lower.

Limited Brands (down $2.10 to $27.48, Charts) said sales rose 4 percent, missing expectations. Shares slumped more than 6.8 percent in active trading.

Market breadth was mixed. On the New York Stock Exchange, losers beat winners by a narrow margin on volume of 1.42 billion shares. On the Nasdaq, advancers topped decliners 8 to 7 on volume of 1.76 billion shares.

U.S. light crude oil for February delivery fell $2.73 to $55.59 a barrel on the New York Mercantile Exchange following the release of the weekly oil inventory report. The report showed a bigger than expected drop in crude supplies.

Treasury prices gained, lowering the yield on the benchmark 10-year note to 4.61 percent from 4.66 percent late Wednesday. Bond prices and yields move in opposite directions.

In currency trading, the dollar gained versus the euro and slipped versus the yen.

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