Wall Street report: Tuesday close

THE so-called Santa Claus rally gathered steam after several major companies including the world's richest said they would meet investors' profit expectations.

Stronger-than-expected news on housing fed into a broad rally which lifted the Dow Jones Industrial Average 106.42 points or 1.1% to 9,998.39. The Nasdaq Index, which jumped 1.8% on Monday, climbed 17.30 points or 0.9% to 2004.75.

General Electric, the giant conglomerate that makes products including aircraft engines, stoves and power plants, said it 'remained comfortable' with current profit predictions and said it should increase profits by 10% in the next two years, even if the global economy did not rebound. 'This year has been a test case for the GE business model and full-year results show we've clearly outperformed,' said chief executive Jeff Immelt. Cost-cutting would be needed to help produce those numbers, including 3,000 jobs in its financial subsidiary, which provides roughly 40% of the company's profits. GE shares leapt $1.42 or 3.7% to $39.72.

Pfizer, the pharmaceuticals giant, said it was confident it would meet profit forecasts and its shares firmed 31 cents or 0.8% to $40.64. Major electronic retailers Circuit City and Best Buy added to the more confident tone by reporting stronger sales. Circuit City shares gave back most of their early gains to close ahead just 16 cents or 0.7% to $23.86. Best Buy surged $3.55 or 5.1% to $72.55.

Analysts said the reassurance from the executive suites was welcome. 'That's what you want to be seeing,' said Larry Wachtel, market analyst at Prudential Securities. 'You're in this confessional period so when these big blue-chip companies have positive guidance, that's also psychologically healthy.'

Washington helped spark the rally when it said housing starts rose an unexpected 8.2% to 1.64m in November, from 1.52m in October. Economists, who had expected a slight drop, said housing construction was helped by unusually mild weather during the month.

Some major industrial shares seemed to tee off that number with aluminium giant Alcoa rising $1.19 or 3.3% to $37.70, heavy equipment maker Caterpillar adding $1.45 or 2.9% to $51.35 and chemicals maker DuPont tacking on $1.18 or 2.8% to $43.30.

But some of the enthusiasm for 'cyclical' companies might evaporate in the wake of Alcoa's after-hours warning that it was falling short of profit expectations.

Mixed news from cellphone maker Motorola after the closing bell could also weigh on trading. Motorola said it would cut another 9,400 jobs as its business remained flat, although it expected to return to profit next year.

Priceline.com, the online retailing site that featured Star Trek actor William Shatner in its ads, soared 69 cents or 12% to $6.26 after it announced a marketing alliance with AOL Time Warner.

Solectron, a major electronics maker, lost $2.71 or 18% to $12.10 as it warned that business was not as strong as expected. Biotech company Amgen, which on Monday announced plans for an agreed $16bn (£10.2bn) takeover of smaller rival Immunex, shed $1.10 or 1.9% to $58.39.