Stocks limped into the close Thursday, eking out the first positive day of the week as traders shifted their focus from Europe's problems and onto some positive U.S. economic news.
Major averages finished the day modestly positive after surging by as much as 1 percent earlier. Defensive stocks such as staples, health care and utilities were most popular, while tech once again lagged.
Weekly initial jobless claimshit a three and a half year low and economic bellwether FedEx reported earnings that were better than expected.
Also the Philadelphia Fed’s Business Outlook for December surprised sharply to the upside with a reading of 10.3 against expectations of a 4. A decline in industrial production and a surprising rise in producer prices tempered the otherwise positive news.
Economists, though, were cautious about how bright a picture the data painted.
"The steady decline in the number of initial claims for unemployment insurance continues to be a bright spot in the economic data picture," Nomura economist Jeffrey Greenberg said. "Jobless claims only inform us about one side of the job growth equation, jobs lost, and the data suggest cuts have not picked up. What the report does not include, namely jobs being added, remains lackluster."
Elsewhere, retail stocks gained 1 percent after the industry's trade group TheNational Retail Federationraised its forecast for holiday sales. The group now sees holiday sales up 3.8 percent to a record $469.1 billion, higher than its previous forecast of 2.8 percent growth, which it issued earlier this year.
Also boding well for retailers, FedEx said its earnings topped estimates due to strong growth in online shopping, which boosted demand for FedEx shipping services. FedEx , which also backed its forecast for fiscal 2012, saw its shares up sharply.
Eight of 10 Standard & Poor's 500sectors were positive, while gainers beat losers 5 to 1 on the Dow Jones industrials. JPMorgan Chase and DuPont led the bluechips, while Alcoa and IBM, which announced the acquisition of procurement and telecom expense management vendor Emptoris, were the biggest laggards.
The Nasdaqtech barometer was faring less well and flirted with negative territory as traders continued to punish mining equipment-maker Joy Global for its lackluster earnings report Wednesday. On the plus side, Novellus shares surged on news it will be purchased by fellow semiconductor equipment maker Lam Research in an all-stock deal valued at $3.3 billion.
Bank stocks had another nice day, with the KBW Bank Index up nearly 1 percent.
"Investors may be about to understand that the European banking cisis is creating opportunities for American banks," Dick Bove, vice president of equity research at Rochdale Securites, said in a note.
Importantly for the markets, the euro ended its slide against the U.S. dollar.
"From a contrarian viewpoint, the extreme bullishness toward the dollar, and bearishness toward the euro, suggests to us that these currencies are closing in on a major reversal of fortune, which could be bullish for stocks," said Sam Stovall, chief equity strategist for Standard & Poor's.
Airline stocks gained 3.5 percent, led by Delta, while home construction stocks rose 2.3 percent.
Aetna, the third largest U.S. health insurer, raised its estimate for 2011 and 2012 operating earnings per share and said it bought back 40 million shares through December 9 this year.
Michael Kors also opened for trading as the luxury apparel company saw its initial public offering price higher than expected.
In other markets, gold continued its slide and mining stocks such as AngloGold Ashanti were trading lower as well.
Crude oil prices turned lower though the rest of the energy spectrum remained positive.
European stocks closed higher, halting a steep one-week drop, but the gains were seen boosted in part by short covering while negative news on the corporate front, from Credit Agricole's profit warning to Telefonica's dividend cut, kept investors on edge.