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NEW YORK - US stocks ended higher on Friday as sharply lower oil prices and strong profits from AIG outweighed investors' worries that Walt Disney Co. may struggle to sustain earnings momentum.

A drop of 2.6 per cent in crude oil prices helped shares of industrial conglomerates such as Caterpillar Inc., which is among the US manufacturers with a huge appetite for energy. But the falling crude prices pressured shares of big energy companies, including Exxon Mobil Corp., which limited a broader market advance.

The Nasdaq turned in its best weekly performance in two months, with strong results this week from technology bellwethers such as Cisco Systems Inc., the internet network equipment maker. Healthy profits and outlooks from big tech companies helped push the Nasdaq up on Thursday to 2,401.33, its highest level in almost six years.

The Dow Jones industrial average rose 5.13 points, or 0.04 per cent, to finish Friday at 12,108.43, after shifting to a slight gain for the day in the session's final minutes. The Standard & Poor's 500 Index added 2.57 points, or 0.19 per cent, to end at 1,380.90.

The Nasdaq Composite Index gained 13.71 points, or 0.58 per cent, to close at 2,389.72.

For the week, the Nasdaq rose 2.53 per cent. The Dow advanced 1.02 per cent for the week and the S&P 500 gained 1.22 per cent.

"Tech stocks have been looked at as the next area of opportunity for the market. It's clearly about the earnings profile at the major companies," said Joseph Battipaglia, chief investment officer for Ryan, Beck & Co., brokerage and research firm in Yardley, Pennsylvania.

Cisco's stock rose 0.1 per cent, or 3 cents, to end Friday's session at US$26.74 on Nasdaq -- a modest gain coming a day after its 9 per cent run-up on Thursday to US$27.44, its highest level since January 2004.

US crude for December delivery dropped US$1.57 to settle at US$59.59 a barrel on the New York Mercantile Exchange after the International Energy Agency cut its outlook for 2006 global oil demand.

Caterpillar was up 0.7 per cent, or 40 cents, at US$59.60, while Exxon Mobil was down 0.3 per cent, or 19 cents, at US$74.42 on the New York Stock Exchange.

"If the stock market doesn't rally on good news such as a price decline in oil, then that suggests some underlying weakness that's likely to continue next week," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York.

The biggest boost to both the blue-chip Dow and the broad S&P 500 came from American International Group Inc, whose shares rose 2.3 per cent, or US$1.59, to US$69.63, a day after the world's largest insurer by market value said quarterly profit more than doubled. AIG said its results benefited from an absence of major hurricanes hitting the United States this year.

But shares of Disney dropped 3.5 per cent, or US$1.18, to US$32.40 on the NYSE, dragging on both the Dow and the S&P 500. Disney, the No. 2 US entertainment company and a Dow component, posted a stronger-than-expected quarterly profit late on Thursday. But investors were concerned about sustainability of earnings growth in the months ahead.

"Disney is selling off because people are afraid it's going to be hard to do an encore," said Jim Awad, chairman of Awad Asset Management in New York.

Drug and health-care stocks like Pfizer Inc. extended a three-day decline as some investors believe a newly Democrat-controlled Congress may move to curb drug prices.

Pfizer shares slipped 0.5 per cent, or 13 cents, to US$25.71 in Big Board trading.

Trading was moderate on the NYSE, with about 1.43 billion shares changing hands, below last year's daily average of 1.61 billion, while on Nasdaq, about 1.74 billion shares traded, below last year's daily average of 1.80 billion.

Advancing stocks outnumbered declining ones by a ratio of 2 to 1 on the NYSE and by about 3 to 2 on Nasdaq.

- REUTERS