The holiday shopping season is under way, and stocks, at least so far, are among the hottest-selling items. The Dow Jones industrial average...

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NEW YORK — The holiday shopping season is under way, and stocks, at least so far, are among the hottest-selling items.

The Dow Jones industrial average is again flirting with 11,000, a level not seen since June 7, 2001. The Standard & Poor’s 500-stock index and the Nasdaq are at 4 1/2-year highs.

But can this early-arriving Santa Claus rally continue?

Many traders and market strategists say it can, provided oil prices and overall inflation stay in check, shoppers pile up their carts over the holidays and the housing market continues to cool off rather than collapse.

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“Bit by bit we are seeing the pieces of the economic mosaic come together that could support a sustained stock-market rally, at least in the short term” said Phil Dow, chief equity strategist at RBC Dain Rauscher. “But in the longer term, there are still significant questions, no doubt about it.”

At the end of Friday’s shortened trading session, the Dow Jones industrial average stood at 10,931.62, up 15.53.

Microsoft, one of the 30 Dow stocks, fell 16 cents to close at $27.76, and was down 1.1 percent for the week. Boeing, also a Dow stock, slid 38 cents to $69.06, ending the week up 3.2 percent.

Broader stock indicators were also higher. The Standard & Poor’s 500 index was up 2.64 at 1,268.25, and the Nasdaq composite index rose 3.03 to 2,263.01.

This year’s fourth-quarter advance mirrors a similar surge last year and fits the historical trend in which stocks tend to turn in their best performances in the final months of the year. The current rally began late last month as investors embraced a drop in oil prices and evidence that hurricanes Katrina and Rita had inflicted little lasting damage on the economy.

The advance continued this month as investors warmed to Ben Bernanke as the anointed successor to Federal Reserve Chairman Alan Greenspan. The market cheered relatively tame inflation numbers and double-digit corporate-earnings growth. Attractive stock prices have also enticed investors.

This week, investors seized on minutes from the Fed’s Nov. 1 meeting as a signal that the central bank could stop raising interest rates early next year. Higher rates make mortgages and other consumer debt more expensive and make it more costly for companies to borrow money to expand. The Fed has raised its key rate 12 times since June 2004, and the target rate for overnight loans between banks is now 4 percent, the highest in more than four years.

But faith in a quick end to rate increases is by no means uniform. Merrill Lynch chief U.S. strategist Richard Bernstein said he viewed recent comments from Bernanke as a virtual guarantee that the incoming chairman will raise rates at least once more when he takes over in February, if for no other reason than to cement his credentials as an inflation fighter.

Bernstein added that several times the Fed pushed rates too high, choking off growth. “Greenspan was five for five in getting it wrong,” he said.

Other factors also might affect the markets’ direction. The cold snap in the Northeast could drive the price of natural gas higher and stick consumers with nasty bills. A more rapid decline in home prices could cut deeply into discretionary spending as homeowners begin to feel less flush.

“You can never be 100 percent sure that instead of a soft landing you won’t get a much harder landing,” said Klaus Martini, global chief investment officer at Deutsche Bank’s Private Wealth Management division.

But traders and money managers said falling oil prices have been the biggest factor in the rally. After approaching $70 a barrel after hurricanes Katrina and Rita smashed the Gulf Coast, the price of a barrel of crude is below $60.

Technology shares, driven by Google’s surge to $422.86 per share, have led the rally, taking over for homebuilders such as Toll Brothers, which have fallen on signs of a weakening real-estate market. Strategists say the tech rally is driven by hope that consumers will spend on hot gadgets, such as Apple’s iPod.

Neil Hennessy, president and portfolio manager of Hennessy Funds, said the rally will get its next test when holiday retail-sales figures come in. He expects them to be robust.

“All I know is that people like to be happy, and spending money on other people makes them happy,” he said.

Information on Friday stock market closings provided by The Associated Press