Stocks should maintain their 3 1/2-year highs next week as they ring out 2004, helped by investor interest in large-cap stocks and a steady rebound in beaten-down drug companies.

Pfizer (PFE) recently got a bounce following a steep fall last week, after a study of Alzheimer's patients eased investors' fears that U.S. regulators will force the drug maker to withdraw its arthritis drug Celebrex.

Meanwhile, large-cap companies such as General Electric Co. (GE) could also give the market strength. The U.S. multinational could gain from a weaker dollar as it makes the prices of its goods more competitive overseas, strategists said.

The dollar hit a record low against the euro on Thursday in partly technically driven trading after a mixed batch of U.S. economic reports provided no motivation to buy the currency.

But trading volume is also expected to be extremely light, during what has historically been a quiet week for the stock market as many investors will be taking off work for the entire week.

"Drug stocks and large-cap stocks will help the Dow, but we will be stuck in conditions of light volume, lack of liquidity and it is going to be easy for large institutional traders to push the market in any given direction as a lot of traders just take the week off," said Paul Mendelsohn, chief investment strategist at Windham Financial Services.

Big Board trading was light on Friday, with about 1 billion shares changing hands, below the 1.4 billion daily average for last year.

Investors wound up their holiday week in a cheerful mood as Wall Street's "Santa Claus rally (search)" pushed the blue-chip Dow average and the S&P 500 to fresh 3 1/2-year highs for the third straight day. Thursday's close marked the end of the trading week before the long Christmas holiday weekend.

The stock market will be closed Friday for the observance of Christmas, which falls on Saturday this year.

For the week, stocks rose. The blue-chip Dow Jones industrial average (search) closed at 10,827.12, up 1.66 percent for the week, while the broad Standard & Poor's 500 index (search) ended at 1,210.13, up 1.33 percent. The tech-driven Nasdaq Composite Index (search) finished at 2,160.62, up 1.19 percent for the week.

Stocks have risen in six of the past seven weeks since the presidential elections.

So far this year, the Dow is up almost 4 percent, while the broader S&P 500 has gained 9 percent. The Nasdaq has climbed nearly 8 percent.

As many traders decide to take a break next week, they can rest assured that low-volume trading, the lack of substantial earnings and economic data will prevent any major swing in the market while they are away.

The week's data will include November U.S. existing home sales on Wednesday and the Chicago Purchasing Managers' Index, also known as the Chicago PMI, on Thursday.

Amid thin trading, any uptick in the markets could be led by health-care and large-cap stocks, strategists said.

The health-care sector, plagued by drug safety issues, has been the worst-performing sector so far this year in the S&P 500 index.

Pfizer's stock fell sharply last week after a cancer-prevention study showed that large doses of Celebrex increased the risk of heart attack. The stock rebounded this week after a study of Alzheimer's patients found that the arthritis drug carried no increased cardiovascular risks.

"The market has completely overblown the risks of drugs in general because any drug taken has risks associated with it, especially if they are taken in dosages above the norm," said Michael Bee, lead equity strategist at Boyd Watterson Asset Management LLC. "The market is starting to recognize that there is a lot of value there and the risks aren't as high as people would expect."

Investors could also shift focus to large-cap stocks from small-cap companies such as Internet media company Travelzoo Inc., which has risen more than 1,000 percent for the year to date.

The weaker dollar is expected to benefit large-cap multinational companies such as Tyco International Inc. , a diversified manufacturer, and GE as it makes their products more competitive abroad and boosts their sales, strategists said.

"There are lots of professional managers out there who believe that small caps have run their course and the large caps are going to be the dominant theme in the early part of next year because the small caps are overvalued relative to large caps," Windham Financial's Mendelsohn said. "The rotation will continue to drive the markets through the year end."