NEW YORK - US stocks rose in light trading on Thursday, pushing the S&P 500 to its highest close since January, as a pullback in oil prices eased concerns about inflation and a battle to control Yahoo helped the tech sector.

The Nasdaq also had its best close since Jan 3. Shares of chip maker Intel Corp jumped 4.7 per cent after Lehman Brothers raised its price target on the stock, citing strength in notebooks and servers.

Crude oil futures fell to below US$122 (S$168) a barrel during the session, but shares of energy companies gained as investment bank UBS sharply raised its projection for oil prices. Shares of Exxon Mobil Corp advanced 1.6 per cent to US$91.30.

News late in the session that key members of the US Senate reached a deal on a housing rescue plan raised hopes for the beleaguered home market.

Financier Carl Icahn started a proxy battle to get control of Yahoo and force it to strike a deal with Microsoft Corp. Other deal news included CBS's plan to buy CNET Networks.

'Tech is doing great ... That's very encouraging and the Nasdaq chart is the strongest one out there right now,' said Mr Joe Saluzzi, co-manager of trading at Themis Trading, in Chatham, New Jersey.

The Dow Jones industrial average shot up 94.28 points, or 0.73 per cent, to end at 12,992.66. The Standard & Poor's 500 Index rose 14.91 points, or 1.06 per cent, to 1,423.57. The Nasdaq Composite Index climbed 37.03 points, or 1.48 per cent, to close at 2,533.73.

Trading volume continued to be very light on the New York Stock Exchange, with about 1.20 billion shares changing hands, well below last year's estimated daily average of roughly 1.90 billion. On Monday, NYSE volume hit its low for the year at 1.05 billion.

Soxx up, CNET soars
Intel was up US$1.13 at US$24.97, while the Philadelphia Stock Exchange index of semiconductors rose 2.1 per cent.

June crude dipped 10 cents to settle at US$124.12. Traders said a surprisingly large increase in US natural gas inventories contributed to crude's fall. Earlier this week, US crude hit an intraday record at US$126.98 a barrel.

'Oil sold off, which was nice, even though it's still very high. That's part of what happened,' said Mr Todd Leone. head of listed trading at Cowen in New York.

In the sweeping housing rescue plan, the two largest US housing finance companies, Fannie Mae and Freddie Mac, would backstop a government mortgage insurance fund, two industry sources told Reuters. Shares of home builders surged after the news. An index of home builders rose 3.7 per cent.

On the Nasdaq, Yahoo shares gained 2.3 per cent to US$27.75, while Microsoft rose 1.7 per cent to US$30.45.

When talks between Microsoft and Yahoo ended earlier this month, the software company was offering US$33 a share for Yahoo, but the Internet company was holding out for US$37.

Shares of CBS slid 2.4 per cent to US$24.23 on the NYSE, while shares of CNET surged 43.5 per cent to US$11.41. CNET was the Nasdaq's second-biggest percentage gainer.

JC Penney shines
Retailers benefitted after JC Penney said its earnings in the current quarter could top analysts' forecasts.

The outlook drove JC Penney's battered stock up 4.7 per cent to US$46.32 even though it posted a 50 per cent profit drop in the first quarter.

Data painted a mostly weak picture of the US economy. A report showed softer-than-expected US industrial output for April and a manufacturing report from the New York Federal Reserve Bank was also weak.

Meanwhile, initial jobless claims rose slightly more than expected in the latest week.

Volume on Nasdaq was stronger than on the NYSE. About 2.22 billion shares traded, above last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones by a ratio of about 7 to 3 on the NYSE and by 8 to 5 on Nasdaq. -- REUTERS