Stocks ended flat in very light trading Thursday as investors kept away from the market despite an unexpected drop in unemployment claims and retreating oil prices.

The Dow Jones industrial average (search) ended down 28.89 points, or 0.27 percent, at 10,800.30. The Standard & Poor's 500 Index (search) rose 0.10 of a point, or 0.01 percent, to 1,213.55. The technology-laced Nasdaq Composite Index (search) finished up 1.34 points, or 0.06 percent, at 2,178.34.

The number of Americans applying for first-time jobless aid unexpectedly fell by 5,000 last week, according to a government report, and gave a boost to stock futures. The report followed stronger consumer confidence data earlier this week from the Conference Board.

Jobless claims, together with the "stunning consumer confidence number this week ... would lead you to believe that the jobs picture is rapidly improving," said Phil Flynn, senior market analyst at Alaron Trading Corp.

Crude oil futures fell slightly one day after the bombings in Saudi Arabia raised new concerns about terrorism in the oil-rich Middle East. A barrel of light crude was quoted at $43.45, down 19 cents, on the New York Mercantile Exchange (search).

Despite the good economic news, investors sold off large-cap stocks and booked profits before the year's end. The major indexes were nearly flat most of the session, and trading was light as many investors took time off for New Year's.

"Most of the big money left a week ago, and all you're seeing now is a little speculation and some tax-planning moves," said Will Gourd, investment advisor at J.P. Morgan Private Bank. "But the economic data looks good, energy prices are stabilizing, yesterday notwithstanding, and things look good for next week when everybody comes back."

Two Dow components -- the world's largest aluminum producer Alcoa Inc. (AA), and drug maker Pfizer Inc. (PFE) -- dragged on the blue-chip average.

Alcoa fell 1.4 percent to $31.45 after Lehman Brothers cut its fourth-quarter and 2005 earnings estimates for the company, citing higher costs and a weaker dollar.

Pfizer slipped 1 percent to $27.01 following a report in The Wall Street Journal which said Celebrex prescriptions slid 56 percent last week in the United States after a study linked the Pfizer drug to a higher risk of heart attacks and strokes.

Despite two down days earlier this week and the Dow's losses Thursday, analysts said the market was still in good shape to further its post-election gains in January, at least until first-quarter earnings season in the middle of the month.

"I think you've got maybe another 3 or 4 percent (increase) to go yet in January," said Russ Koesterich, U.S. equity strategist at State Street Corp. in Boston. "After that, you'll see interest rates rising again and it could get tougher. But for now, we're looking pretty good."

In corporate news, Fannie Mae (FNM) jumped 95 cents to $71.33 after it sold $5 billion in preferred stock to unnamed institutional investors, $1 billion more than expected. The gains will likely be used to offset massive losses expected with the embattled mortgage giant restates its earnings in the wake of its recent accounting scandals.

The Boeing Co. (BA) dropped 17 cents to $51.90 despite an announcement from Continental Airlines Inc. that it would buy 10 7E7 Dreamliners, becoming the first U.S. carrier to place an order for Boeing's newest passenger jet. Continental rose 25 cents to $13.70.

Microsoft Corp. (MSFT) said it will no longer market its Passport identification service, in which customers could store passwords and credit card information for online shopping. The move came after online auctioneer eBay Inc. said it would no longer recognize Passport, once a lynchpin of Microsoft's online strategy. Microsoft slipped 14 cents to $26.76.

U.S. steel companies Nucor Corp. (NUE) and United States Steel Corp. (X) were the worst performing stocks in the S&P 500 during the session on concerns that slowing Chinese demand could lead to oversupply and drive down steel prices.

Nucor plunged 6.4 percent to $51.38 and U.S. Steel slumped 5.5 percent to $50.04.

Wall Street was quiet as investors wound down for the New Year. About 830 million shares changed hands on the New York Stock Exchange, far below the 1.4 billion daily average for last year. About 1.39 billion shares were traded on Nasdaq, below the 1.69 billion daily average last year.

Advancers outnumbered decliners on the Nasdaq by about 2-to-1, but on the NYSE advancing stocks were only slightly ahead of those declining.

The Dow is up 3.3 percent for the year, with just one trading day to go, while the S&P 500 is up 9.1 percent so far, and the Nasdaq Composite Index is up 8.7 percent for the year to date.

The Russell 2000 index of smaller companies was down 0.28, or 0.04 percent, at 653.06.

Overseas, Japan's Nikkei stock average climbed 0.94 percent. In Europe, Britain's FTSE 100 closed up 0.01 percent, France's CAC-40 rose 0.02 percent for the session, and Germany's DAX index gained 0.2 percent.

Reuters and the Associated Press contributed to this report.