The ISM said that its index of business activity in the service sector rose to 59.8 in December from 58.5 in November. Economists had been expecting a more modest increase to 59.0, with a reading above 50 indicating growth in the sector.

The better than expected increase in the pace of growth reflected a notable acceleration in new orders growth, with the new orders index rising to 61.9 in December from 59.5 in November.
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended December 31, showing that jobless claims fell more than economists had been expecting.

The Labor Dept. said that jobless claims fell to 291,000 from the previous week''s revised figure of 326,000. Economists had been expecting jobless claims to fall to 320,000 from the 322,000 originally reported for the previous week.

The report also showed that the less volatile 4-week moving average fell to 316,750 from the previous week''s revised average of 326,000.

The Labor Dept. added that continuing claims during the week ended December 24 rose to 2.718 million from the preceding week''s revised level of 2.705 million.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks rallied for a fourth straight session, boosted by strong tech and export issues after the strong performance of U.S. S&P 500 at the close of 2005. The leading gainers were Taiwan’s Weighted index, soaring 1.4% to 6,709.87 and Singapore Straits Times, up 0.99% to 2,407.80. The Nikkei advanced 0.4% to 16,425.37. Shanghai Composite extended gains to close up 1.4%.

European stocks lost ground for the first time in 2006, pressured by weak mining and utility shares. The German DAX 30 declined 0.1%. The French CAC 40 lost 0.07% and London’s FTSE 100 dropped 0.4%.

OIL, METALS, CURRENCIES

Crude oil prices retreated before climbing back above $63 after a petroleum report showed a less-than-expected drop in crude inventories, but a larger-than-expected rise in supplies of distillates and gasoline. Light sweet crude for February delivery gained 2 cents to $63.34 a barrel. Heating oil traded 1 cent down at $1.8025 a gallon. Gasoline added 2 cents to $1.8025 a gallon. Natural gas dipped 60 cents to $9.60 per 1,000 cubic feet.

European gold declined. In London gold fell to $526.90 per troy ounce, down from $530.90. In Zurich the precious metal slipped to $526.85 from $529.35. In Hong Kong gold fell $2 to close at $532.10. Silver closed at $8.84, down from $9.05.

The U.S. dollar traded mixed against major currencies. The euro was quoted at $1.2083, down from $1.2122. The dollar bought 115.99 yen, up from 115.95. The British pound traded at $1.7555, down from $1.7581.

EARNINGS NEWS

Performance Food Group Co, (PFGC: chart), food and non-food products distributor, reported that Q1 earnings are expected to be 11 cents to 15 cents a share and fiscal 2006 earnings are seen at $1.20 to $1.30 a share, missing analysts'' estimates standing at 18 cents and $1.33 a share, respectively.

Shoe Carnival, (SCVL: chart), footwear retailer, announced that its December same-store sales advanced 10.6%. Total sales for the five weeks ended Dec. 31, increased 12.8% to $72.5 million.

Chico''s FAS Inc, (CHS: chart), apparel retailer, reported same-store sales advanced 16.4% in December. Total sales for the five weeks ended Dec. 31 rose 34.3% compared with the same period a year earlier. The company expects earnings of 24 to 25 cents a share for Q4, missing on that basis the analyst estimate for earnings of 26 cents a share.

New York & Co, (NWY: chart), specialty retailer, reported that its December same-store sales increased 10.9%. Total sales for the five weeks ended Dec. 31, advanced 16.2%, beating on that basis analysts’ expectations of a same-store sales gain of 5.1%. The company expects earnings of 34 cents to 36 cents a share, up from its earlier range of 29 cents to 36 cents a share. Analysts were projecting 36 cents a share.

Cache Inc, (CACH: chart), women''s apparel retailer, reported that December same-store sales advanced 4% over the comparable period a year ago, and increased 4% during Q4. Total sales grew 6.5% in December, and advanced 0.9% from last year''s fourth-quarter period. The company added that earnings for the quarter would be at the low of its previously forecasted range of 46 cents to 48 cents a share.

Bebe Stores Inc, (BEBE: chart), women''s apparel and accessories retailer, reported that same-store sales in December increased 1.1% over year-ago levels. Total sales for the period advanced 11.1%. For the fiscal Q2, the company announced that same-store sales gained 2.2% while total sales were up 11.5%.

Panera Bread Co (PNRA: chart), food for breakfast and lunch producer, reported its December systemwide comparable bakery sales increased 7.2%. The company forecast earnings per share for the quarter of 50 cents to 51 cents a share. Analysts anticipated earnings of 50 cents a share.