NEW YORK Wall Street rose Thursday as investors bought back into stocks after two days of losses, encouraged by a drop in unemployment claims and a better-than-expected sales performance by discount retailers.
Although last week the Labor Department said the four-week average of initial unemployment claims rose to a two-and-a-half-year high, investors were pleased to hear that claims last week fell by more than expected, following a surge the previous week.
And while many retailers from Gap Inc. to Saks Inc. said Thursday that March sales slid as consumers grew more frugal, Wall Street was encouraged that other companies are weathering the economic weakness. Discount retailers Wal-Mart Stores Inc. and Costco Wholesale Corp., stores that sell staples like food and gasoline, reported sharp increases in March sales and indicated they expect sales to keep rising.
"The jobless claims snapped back down following the sharp rise last week. Combined with the news from Wal-Mart, it suggests that the consumer may be able to muddle through. That's providing some support for an otherwise strained market," said Alan Gayle, senior investment strategist for RidgeWorth Capital Management.
Questions about the health of the global financial system ahead of next week's bank earnings, however, continue to provide a troubling backdrop for the market. Lehman Brothers Holdings Inc. disclosed in a regulatory filing Wednesday that it liquidated three funds because of the tight credit markets and brought the assets of those funds, valued at $1 billion, onto its books Feb. 29. The investment bank said it also purchased deteriorated assets valued at $800,000 from other distressed funds.
"We think everything is better, and then we get another surprise. Every credit rock we turn over has something else crawl out from under it," Gayle said.
According to preliminary results, the Dow Jones industrial average rose 54.72, or 0.44 percent, to 12,581.98.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 6.06, or 0.45 percent, to 1,360.55, and the Nasdaq composite index rose 29.58, or 1.27 percent, to 2,351.70.
"This market is basically trying to look forward," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc.
"There's a lot of negative factors," Cardillo said. Treasury Secretary Henry Paulson said in a speech Thursday that the economy has turned sharply lower, echoing comments by Federal Reserve Chairman Ben Bernanke, who has acknowledged the United States is probably in recession. But, Cardillo noted, "the market knows all of these things."
Government bonds fell as stocks rose. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.53 percent from 3.48 percent late Wednesday.
The Nasdaq got a big boost after Japanese drug maker Takeda Pharmaceutical Co. announced an $8.8 billion, all-cash bid for U.S. biotechnology company Millennium Pharmaceuticals. Millennium soared $7.99, or 49 percent, to $24.34.
After surging to a record Wednesday, light sweet crude fell 76 cents to settle at $110.11 a barrel on the New York Mercantile Exchange.
The dollar regained ground after the Bank of England lowered its base lending rate by a quarter-point to 5 percent, the lowest level in 17 months, and the European Central Bank left its rates unchanged. Gold prices fell.
In other corporate news, Yahoo Inc. and Time Warner Inc.'s AOL are close to a deal to combine their Internet operations, according to published reports. The deal is aimed at thwarting Microsoft Corp.'s effort to buy Yahoo, but the software giant reportedly is talking with Rupert Murdoch's News Corp. about launching a joint bid for Yahoo.
Yahoo rose 82 cents, or 3 percent, to $28.59. Time Warner gained 18 cents to $14.61.
Microsoft added 22 cents to $29.11, while News Corp. gave up 9 cents to $19.44.
Wal-Mart rose 52 cents to $54.66 after reporting its sales figures, and Costco rose 49 cents to $66.52.
Lehman Brothers slipped 29 cents to $40.25 after the fund liquidations.
The Russell 2000 index of smaller companies rose 9.04, or 1.29 percent, to 707.42.
Advancing issues outnumbered decliners by just under 2 to 1 on the New York Stock Exchange, where volume came to 1.28 billion shares.Overseas, Japan's Nikkei stock average dropped 1.27 percent. Britain's FTSE 100 fell 0.31 percent, Germany's DAX index fell 0.25 percent, and France's CAC-40 fell 0.32 percent.