Stocks surged yesterday, with blue chips posting the sharpest gains as investors focused on the positive news in the latest economic reports...

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NEW YORK — Stocks surged yesterday, with blue chips posting the sharpest gains as investors focused on the positive news in the latest economic reports: a drop in unemployment claims, a rise in exports and a narrower U.S. trade deficit in December.

The Dow Jones industrial average closed up 85.50 at 10,749.61. It was the Dow’s best finish so far in 2005, but the index of 30 actively traded stocks was still 33 points down for the year

Microsoft, one of the 30 Dow stocks, slipped 1 cent to close at $26.06 a share. Boeing, also a Dow stock, fell 26 cents to $53.86.

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The broader gauges also moved higher, but remained in negative range for the year. The Standard & Poor’s 500 index rose 5.02 to 1,197.01. The Nasdaq composite index gained 0.55 to 2,053.10.

After an earnings season that produced better-than-expected results for most companies, investors have been looking for a reason to buy, and the day’s economic news offered some incentive, analysts said.

Weekly jobless claims fell to their lowest level in four years, while the Commerce Department announced a decline in the trade deficit in December; the two reports combined to produce a positive feeling in the stock market, analysts said.

“We started the day with very upbeat numbers … and I think momentum has taken over,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. “It doesn’t take much to get the ball rolling, and once you do, you start to have a lot of investors, particularly active investors like hedge funds, jump on board.”

“Overall, if you look at the market, the performance today is generally positive, with strength concentrated mainly in energy and basic material-related groups,” said Michael Sheldon, chief market strategist at Spencer Clarke. “The dollar has shown some weakness, and as a result we’ve also seen a pickup in gold-related shares, which have experienced a significant amount of selling over the past several weeks.”

Crude-oil futures climbed $1.64 to settle at $47.10 per barrel on the New York Mercantile Exchange after an international energy-market watchdog raised its forecast for daily oil demand in 2005 and said demand for OPEC crude in the first quarter would outstrip supply.

The Dow’s top performer, insurer AIG, catapulted 4.7 percent, or $3.28, to $72.59, a day after it blew past Wall Street expectations with an 11.5 percent increase in fourth-quarter earnings, and record profits for the year.

Health insurer Aetna rose 4.2 percent, or $5.43, to $133.98, after reporting a 22 percent rise in fourth-quarter earnings on higher premiums and fees, beating expectations. The company also declared a 2-for-1 stock split.