Stocks reverse early losses, move slightly higher

Investors are shrugging off an unexpected rise in jobless claims and cautiously buying stocks.

Investors initially sent stocks lower Thursday after the government said new claims for unemploymenet benefits rose by 15,000 to 627,000 last week. The market expected a decline.

While disappointing, the report was not enough to stop investors from moving back into stocks.

Rising unemployment claims shouldn't be surprising to investors, because unemployment usually continues to increase even when the economy is improving, said Arthur Hogan, chief market analyst at Jefferies & Co.

Instead, investors turned their focus to a handful of positive earnings reports.

Shares of homebuilders rallied after Lennar Corp. said orders for new homes jumped 63 percent during the second quarter and revenue topped expectations.

That news eclipsed the company's slightly larger loss over the year-ago results.

Meanwhile, retailers and other consumer discretionary stocks rallied on an upbeat report from Bed Bath & Beyond Inc. The home furnishings store said its fiscal first-quarter profit climbed 14 percent as sales rose after the liquidation of rival Linens N Things.

In late morning trading, the Dow added 51.84, or 0.6 percent, to 8,351.70, after dropping as much as 40 points in the early going. The Standard & Poor's 500 index rose 6.61, or 0.7 percent, to 907.55, and the Nasdaq composite index rose 18.35, or 1.0 percent, to 1,810.69.

Advancing stocks outnumbered decliners by about 2 to 1 on the New York Stock Exchange where volume came to a very light 299 million shares.

Uncertainty about when the economy will turn around, and how fast it will grow when it finally does, have made for a rocky market this month. The Dow Jones industrial average remains up 26.8 percent from its 12-year low hit on March 9, but is down nearly 500 points, or 5.7 percent, from the five-month high it reached on June 12.

Analysts say traders need to see more concrete evidence of growth before restarting the market's rally.

"People are hesitant to take a position one way or the other," said Doug Roberts, chief investment strategist at Channel Capital Research.

The market is expected to remain volatile throughout the summer months, which are typically marked by light volume that can skew movements in the market.

On Wednesday, the Fed said that "sustainable economic growth" should gradually resume, and inflation will "remain subdued for some time." The statement did little to reassure investors, though, causing stocks to give up gains and finish mixed. Some were hoping the central bank would articulate how it will curb inflation.

Government bond prices edged up after the economic data, and ahead of the last big Treasury auction of the week: $27 billion in seven-year notes.

Most auctions have been attracting solid demand so far this year, but investors are looking for signs of weakness. If demand wanes, the government will have to boost yields sharply to lure buyers. Treasury yields affect consumer borrowing rates.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.67 percent from 3.69 percent late Wednesday.

Lennar shares soared more than 13 percent, adding $1.06 to $8.88, while Toll Brothers Inc. rose 46 cents, or 2.8 percent, to $16.70.

Bed Bath and Beyond gained $2.90, or 10.2 percent, to $31.29.

Among other retail stocks, Home Depot Inc. rose 65 cents, or 2.9 percent, to $23.33, and J.C. Penney Co. jumped $1.36, or 5.1 percent, to $27.96.

Investors also got a piece of good news from a slightly improved reading on gross domestic product. First-quarter GDP shrank 5.5 percent, the Commerce Department said, less than the previous estimate of 5.7 percent.

Crude oil rose 78 cents to $69.45 a barrel on the New York Mercantile Exchange.

The dollar gained against the euro and the British pound. Gold prices rose.

In other trading, the Russell 2000 index of smaller companies rose 4.88, or 1.0 percent, to 499.83.

Overseas, Japan's Nikkei stock average rose 2.2 percent. In afternoon trading, Britain's FTSE 100 fell 1.3 percent, Germany's DAX index fell 1.5 percent, and France's CAC-40 fell 1.2 percent.