S&P 500, Nasdaq hit 5-month highs

By Charley Blaine and Elizabeth Strott

Slowly and quietly, the stock market has been putting in a steady rally this week. It continued today as gains in technology, retail and a number of financial stocks gave the major averages a boost.

At the close, the Dow Jones industrials were up 94 points, or 0.7%, to 12,993. The Standard & Poor's 500 Index pushed up nearly 15 points, or 1.1%, to 1,424, and the Nasdaq Composite Index was up 37 points, or 1.5%, to 2,534.

The closes for the S&P 500 and the Nasdaq were their best since Jan. 3, and, so far this week, the Dow is up nearly 2%, the S&P 500 2.5% and the Nasdaq 3.6%.

The S&P 500's close today was especially important because it pushed past its May 2 intraday high of 1,422.50 and looks poised to push through its 200-day moving average of 1,427. That would be a very bullish signal and would generate a lot of talk that stocks could attack their highs of October.

Technology shares were the strongest sector of the market, with Research In Motion (RIMM, news, msgs), Apple (AAPL, news, msgs), Qualcomm (QCOM, news, msgs), Microsoft (MSFT, news, msgs) and Intel (INTC, news, msgs) all moving higher. (Microsoft is the publisher of MSN Money.)

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Intel jumped 4.7% to $24.96 after Banc of America Securities analyst Sumit Dhanda said he believed the company's move into the low-end chip market with its new lAtom chip will add $500 million to sales in 2008. He also said Intel's move into the lower end of the desktop and notebook chip market may raise average gross margins. Chips generally moved higher.

Research In Motion was up 1.6% to $140.71 on word that it plans to release a touch-screen BlackBerry in the third quarter to compete against Apple's iPhone. It would be sold exclusively through Verizon and Vodafone.

Apple was up 1.9% to $189.73. And Microsoft added 1.7% to $30.45, its first close above $30 since its third-quarter results disappointed investors.

Yahoo (YHOO, news, msgs) was up 2.3% to $27.75 after investor Carl Icahn formally launched a proxy fight to try to take control of the Internet company's board.

JC Penney (JCP, news, msgs) and Tiffany (TIF, news, msgs) were among the retailers rising this afternoon after results from both were better than analysts had expected. JC Penney was up 4.7% to $46.32. Tiffany jumped 6.6% to $48.88.

Financial stocks ended mostly higher. Lehman Bros. (LEH, news, msgs) was up 6% to $44.77. Merrill Lynch (MER, news, msgs) added 2.3% to $49.94, and Citigroup (C, news, msgs) rose 2.1% to $23.73.

Crude starts the rally

Crude oil helped start the rally when traders pushed it to as low as $120 in New York. All energy prices moved lower after a government report showed larger-than-expected natural-gas supplies.

But late-day buying pushed oil back up to $124.12 a barrel, down just 10 cents on the day. Natural gas closed down 2.6% to $11.30 per million British thermal units. So far this year, however, it’s up 51%.

Also pressuring energy prices for much of the day was a Senate vote to strengthen electronic oversight of energy futures trading. The vote was large enough to sustain a threatened veto from President Bush.

Currently, futures traders can accumulate positions in energy futures up to set levels on one exchange. But they can add to their positions on other exchanges. The legislation would allow the Commodities Futures Trading Commission to limit the total positions across all exchanges. The idea is designed to rein in some of the energy speculation.

The big question is whether the market strength can be maintained on Friday. Crude was at $124.30 a barrel in after-hours trading today, up 18 cents from the $124.14 close.

Also, the government will report housing starts and building permits for April on Friday. The consensus estimate for starts is 900,000 units and 940,000 units for permits. Those would be levels not seen since early 1991 and down nearly 40% from a year ago. Starts are an estimate of what's being built now. Permits offer a glimpse of what building will look like later in the year.

Energy prices -- New York close

	Thurs.	Wed.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$124.12	$124.22	-$0.10	9.40%	29.32%
Heating oil (per gallon)	$3.6224	$3.6178	$0.0046	14.02%	36.73%
Natural gas (per million BTU)	$11.3990	$11.5980	-$0.1990	5.13%	52.33%
Unleaded gasoline (per gallon)	$3.1658	$3.1804	-$0.0146	8.00%	27.10%

J.C. Penney's profit falls but cheers street

Department store chain J.C. Penney reported fiscal-first-quarter earnings of $120 million, or 54 cents per share -- a decline from the $238 million, or $1.04 per share, in the same period last year.

The results topped Wall Street's estimate of 50 cents per share and set off buying of the company's shares.

The results suggested a shift in spending habits, as consumers focus on bargains and necessities like food and fuel, instead of luxuries or other discretionary items, but not a collapse.

Penney cautioned that earnings for the current quarter would be 50 cents per share, down from a previous forecast of 75 to 80 cents per share.

Icahn, others gear up for Yahoo fight

Billionaire investor Carl Icahn said he was ready for action, and Yahoo shares moved higher as a result.

• MSN's Stock Challenge: Win $15,000!

Icahn said this morning that he had bought about 59 million shares of Yahoo stock in the past 10 days and had lined up a 10-person slate of nominees to replace Yahoo's board of directors.

Icahn sent an open letter to Yahoo's board, stating that it is "quite obvious" that Microsoft's $33-per-share offer is superior to the prospects of Yahoo as a stand-alone company. He would rather see Yahoo negotiate a deal with Microsoft than have to take over the board.

Late today, Paulson & Co., the New York hedge-fund manager run by John Paulson, said it had bought a 3.6% stake in Yahoo and plans to support Icahn's efforts, Bloomberg News reported. In a Securities and Exchange Commission filing, Paulson said it owned 50 million Yahoo shares.

Hedge fund Eton Park Capital Management, founded by Eric Mindrich, reported that it acquired 4.95 million Yahoo shares in the first quarter and put options on a further 11.5 million shares, Bloomberg said.

Microsoft withdrew a $47.5 billion offer for Yahoo on May 3, after the two companies could not agree on a takeover price. Microsoft had first offered $31 per share for Yahoo on Feb. 1. The offer represented a 62% premium to Yahoo's share price the day before the offer, but Yahoo rejected it as too low.

Many on Wall Street believe that a Microsoft acquisition of Yahoo would create an entity strong enough to challenge Google's (GOOG, news, msgs) dominance in Web advertising. But there are plenty of skeptics, some of them at Microsoft.

Some Yahoo shareholders were disappointed and angry at the breakdown of negotiations with Microsoft. Shares of Yahoo lost 15% during the first trading session after the withdrawal was announced.

• Read Icahn's letter to Yahoo

Today is the deadline for shareholders to nominate directors for Yahoo's board. The entire board is up for election at the annual meeting July 3.

Buffett exits Ameriprise, buys more Burlington Northern

Berkshire Hathaway (BRK.A, news, msgs), billionaire Warren Buffett's investment company, no longer held any Ameriprise Financial (AMP, news, msgs) shares as of March 31, according to a Securities and Exchange Commission filing.

Berkshire had owned 661,742 Ameriprise shares as of Dec. 31 and had owned as many as 30 million shares in 2005. Ameriprise shares fell 1.4% to $50.65 in after-hours trading.

Ameriprise is a financial services company spun off by American Express (AXP, news, msgs).

Berkshire increased stakes in the following at the end of the first quarter: railroad company Burlington Northern Santa Fe (BNI, news, msgs); industrial machinery maker Ingersoll-Rand (IR, news, msgs); food company Kraft Foods (KFT, news, msgs); banking companies U.S. Bancorp (USB, news, msgs) and Wells Fargo (WFC, news, msgs); and health insurer WellPoint (WLP, news, msgs).

It lowered its holdings slightly in records management company Iron Mountain (IRM, news, msgs), the report said.

Bernanke spreads the love

It was a rough morning for economic data, although words from Federal Reserve Chairman Ben Bernanke helped ease concerns somewhat.

• Industrial production fell 0.7% in April, more than twice the decline economists had expected.

• The Empire State Manufacturing index declined in May to a reading of negative 3.2, down from negative 0.6 in April and below analysts' expectations. It's the third month in a row the index came in negative, indicating contraction in manufacturing in New York.

• Initial jobless claims rose by 6,000 to 371,000 in the week ending May 10, the Labor Department reported this morning. The four-week moving average, which smoothes out factors like weather and holidays, fell by 1,000 to 365,700.

Though investors may have been dismayed by the weak economic data, Bernanke had some positive words about the financial sector.

"I strongly urge financial institutions to remain proactive in their capital-raising efforts," he said in a speech at a Chicago Fed conference on credit markets. "Doing so not only helps the broader economy but positions firms to take advantage of new profit opportunities as conditions in the financial markets and the economy improve."

Bernanke said he's "encouraged" by the "ability of many financial institutions, large and small, to raise capital," which he said supports economic expansion.

CBS to buy CNET

CBS (CBS, news, msgs) said this morning it would buy CNET Networks (CNET, news, msgs) for $1.8 billion, or $11.50 a share.

The all-cash deal represents a 44.6% premium to CNET's Wednesday closing price of $7.95. CNET shares soared 44% to $11.41 on the day. CBS was down 2.4% to $24.23.

Miller Tabak analyst David Joyce told CNBC this morning that the deal was instigated by Viacom (VIA, news, msgs) CEO Sumner Redstone's desire to expand operations on the Internet and by CBS chief Les Moonves' need to keep pace with the success of Viacom, which operates in tandem with CBS under Redstone's control.

"With Les Moonves needing to keep up with the other sister CEO at Viacom, Les really has to get more into the Internet space. There could be some news-gathering synergies, and that's why CNET is profitable," Joyce said. "It also brings incremental online advertisers."

Short hits from the markets -- 4 p.m.

	Thurs.	Wed.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.790%	1.785%	0.005	33.58%	-42.99%
5-year Treasury note yield	3.111%	3.228%	-0.117	2.57%	-9.96%
10-year Treasury note yield	3.843%	3.938%	-0.095	2.23%	-4.76%
30-year Treasury bond yield	4.576%	4.637%	-0.061	1.76%	2.62%
Currencies
U.S. Dollar Index	73.490	73.565	-0.075	1.06%	-4.18%
British pound in dollars	$1.9482	$1.9474	0.0008	-2.01%	-2.07%
Dollar in British pounds	£0.5133	£0.5135	-0.0002	2.05%	2.11%
Euro in dollars	$1.5454	$1.5482	-0.0029	-1.07%	5.73%
Dollar in euros	€ 0.6471	€ 0.6459	0.0012	1.08%	-5.42%
Dollar in yen	¥104.69	¥104.99	-0.30	0.73%	-6.40%
Canadian dollar in U.S. dollars	$1.001	$0.998	$0.0029	0.68%	0.78%
U.S. dollar in Canadian dollars	$1.000	$1.002	-$0.0020	-0.59%	-0.75%
Commodities
Gold	$880.00	$882.10	$13.50	1.72%	5.01%
Copper	$3.7385	$3.6810	$0.06	-4.25%	22.94%
Silver	$16.6850	$16.6130	$0.07	0.55%	11.83%
Corn	$5.9900	$5.9625	$0.03	-0.21%	31.50%
Crude oil (NYMEX) (per barrel)	$124.12	$124.22	-$0.10	9.40%	29.32%

IAC to buy parent of Dictionary.com

In another online deal, IAC Interactive (IACI, news, msgs) is planning to buy Lexico Publishing Group, according to published reports. Terms of the deal were not disclosed.

The move is an effort to strengthen IAC Interactive's Ask.com by adding Lexico's Dictionary.com and Thesaurus.com.

Ask.com has approximately a 5% share of the online search market, well behind Google, which has the biggest share -- 60%, and Yahoo, which has 21%.

Answers (ANSW, news, msgs) recently bailed on a deal to buy Lexico for $100 million because of financing difficulties related to turmoil in the credit markets.

IACI shares were off slightly to $23.71.

Google is most popular U.S. site

Google has taken over the top spot from Yahoo as the most popular U.S. Web destination, according to research firm comScore.

Google's audience grew 18%, to 141.1 million in April. Yahoo, now No. 2, saw its audience grow 7% to 140.6 million last month.

Microsoft came in at No. 3, with 121 million.