Stocks closed mixed but the Dow Jones Industrial Average inched up to another record as investors awaited key quarterly reports after the bell.
"You still have some pretty important earnings coming out that are going to set the tone," said Adam Tracy, director of listed trading at Thomas Weisel Partners.
Tech giant Intel rose 2% ahead of a quarterly earnings announcement from rival Advanced Micro Devices , which also saw shares close higher. AMD reversed course in after-hours trading, however, after the company posted a loss that was far wider than expected.
Google also rose ahead of the company's strong earnings report released after the close of trading. The Internet search giant said quarterly profit rose 69% as ad sales climbed.
The Dow Jones Industrial Average closed at a new high for the second straight day but gains were limited to less than 5 points. The blue chip index gained for the sixth straight session. The S&P 500 ended just below the unchanged mark while the Nasdaq fell for the third straight session following mixed news from the tech sector.
Markets opened lower after China reported an 11% rise in GDP and a two-year high in inflation, triggering concerns its central bank may interest rates.
"Early this morning people were nervous about what was going on overseas but then we had some positive data points," Tracy said. "I think people are pretty happy about the way the economy has been going."
Analysts said investors remained optimistic in light of the rapid recovery from the stock swoon of late February and early March, which was prompted by a 9% drop in China's stock market.
"I think investors are a little bit surprised by what they heard from China, but they remember what happened with that sharp selloff in February," said Sam Stovall, chief investment strategist at S&P Equity Research. "They are basically saying this seems to be more of a buying opportunity."
"The market should be nervous about things but we don't need to price in worst-case scenarios," said Art Hogan, managing director at Jefferies. "Six weeks ago that's what we did."
Pharmaceutical companies continued to report robust quarterly profits making healthcare the day's top performer among the 10 sectors in the S&P 500.
Schering-Plough announced strong first-quarter results, surpassing consensus estimates by a wide margin due to strong sales of cholesterol drugs and allergy treatments. The company reported earnings of 42 cents a share, compared with analysts' estimate of 29 cents.
Merck said first-quarter earnings rose on strong sales of cholesterol drug Zetia and asthma treatment Singulair. Shares moved higher but gains were limited since the company pre-announced strong results last Friday.
Shares of Amgen gained after the company said a clinical trial of anemia drug Aranesp in lung cancer patients showed no increased risk of death compared with a placebo.
Telecom services stocks such as Qwest Communications International also showed modest strength, while the energy sector was the worst performer, dragged down by declining oil prices.
New York light crude futures fell more than a dollar to trade below $62 a barrel ahead of Friday's options expiration. Integrated oil giant Exxon Mobil saw modest declines.
Merrill Lynch, the world's largest broker, said Thursday first-quarter profit soared from a year ago, when it took a charge related to its acquisition of asset manager BlackRock. Excluding that charge, the nation's largest retail brokerage still posted a 31% increase in profit, thanks to robust takeover activity and high trading volumes.
EBay said first-quarter earnings surged 52%, topping Wall Street's expectations. The Internet auctioneer said Wednesday results were boosted by strong overseas sales and a solid performance from its online payment division PayPal. CEO Meg Whitman told CNBC the company plans to upgrade its core auction business but has no immediate plans for further acquisitions.
Altria Group, parent of cigarette maker Philip Morris, said Thursday first-quarter earnings fell 21% due to domestic sales weakness, but the company raised its full-year earnings forecast.
In mixed economic news, jobless claims fell less than expected but the index of leading economic indicators rising 0.1% in March, in-line with expectations. The Philadelphia Federal Reserve's manufacturing activity index was 0.2 for April, below forecasts.
China Selloff Pulls Down Asian Markets, Europe Declines
Asian stocks declined sharply and the Shanghai Composite Index fell 4.5% on concerns that monthly economic data could reveal an overheating economy and prompt China's central bank to raise interest rates.
Tokyo's Nikkei 225 Average closed down 1.6%, the largest one-day decline in a month. Exporters such as Canon fell as the yen continued to strengthen against the dollar.
South Korea's Kospi Index also saw its biggest fall in over a month, retreating from a recent record, as exporters such. Samsung Electronics declined on worries China will raise interest rates to curb surging economic growth.
Hong Kong blue chips fell 2% as mainland financial and property stocks tumbled.
In Europe, the London FTSE-100 and the Paris CAC-40 closed down slightly, while the Frankfurt DAX ended down 0.5%.
M&A activity continued unabated in Europe with Spain's Telefonica agreeing to sell its digital radio network Airwave for $3.8 billion to Australia's Macquarie Bank.
U.K. banking giant Barclays' takeover attempt for ABN Amro could see support from other major banks, according to the Wall Street Journal. Spain's BBVA, Bank of America and BNP Paribas could publicly oppose the efforts of a consortium led by Royal Bank of Scotland to break-up ABN, the newspaper said, citing unnamed sources.
A top AT&T executive said on Wednesday political turmoil in Italy was the main reason behind the U.S. phone company's failed bid to buy a stake in Telecom Italia.
France's Schneider Electric posted first-quarter like-for-like sales growth of 13.7%, beating analysts' forecasts.