Stocks pushed into the close to finish around their highest levels for the second day in a row, as banks surged and Wall Street shrugged off fears of a global economic slowdown.
Financials, energy and technology — the market's principal weak spot recently — led gainers, while commodities, particularly mining-related stocks, showed weakness. Consumer staples was the worst of the 10 Standard & Poor's 500 sectors during a day in which the market traded in a tight range throughout the session.
The government said economic growthhad slowed to 1.8 percent in the third quarter, primarily because consumers had pulled back. Economic data showing a surprising drop in weekly jobless claims to their lowest level in three and a half years still left the market wary. A batch of other economic data showing rising consumer confidence, a decline in leading indicators and a drop in housing prices failed to move the markets.
Traders closely watched technical levels to see if the S&P could break its 200-day moving average and get a sustained Santa Claus rally going into the end of the year.
"Any real break above 1260 will send the average to 1300 relatively quickly and with the 'feel good' tone it would not be surprising to see" a holiday rally, said Ken Polcari of LandColt Trading. "Keep in mind that low volumes will create more volatility and the market can turn on a dime."
Akamai Technologies was the biggest percentage gainer on the Nasdaq after the company announced it would acquire Contendo for $268 million.
On the Dow industrials, General Electric and Hewlett-Packard helped the index get out to the plus side, while the weakest performers included consumer-oriented companies Pfizer and Johnson & Johnson.
Bank stocks also put up a strong showing, with Dow components Bank of America and JPMorgan Chase leading the pack. The KBW Bank Index gained 2.6 percent.
Housing was in the spotlight again, after data this week showed a jump in new housing starts and building permits but lackluster sales data, compounded by sharp downward revisions necessitated after the National Association of Realtors admitted to over-counting sales during the market's collapse.
Stifel Nicolaus issued a warning Wednesday on the builders, advising investors to sell into strength. The firm followed Thursday by downgrading KB Home, which dropped sharply along most of the other industry's big names.
The tepid nature of the day's trading reflected investor ambivalence for a market that has shown remarkable swings through the year but very little overall change.
Neutral sentiment rose to a six-and-a-half-year high in the most recent American Association of Individual Investors poll, with 38 percent of respondents saying they are unsure whether the market will be higher or lower in the next six months. Those feeling the market will go higher came in at 33.7 percent — a four-week low — while market bears registered 28.2 percent.
"Many individual investors remain cautious, and/or frustrated, due to ongoing market volatility and headline risk," said Charles Rotblut, vice president of AAII. "European sovereign debt problems, Washington politics and slow economic growth are all weighing on sentiment."
Market momentum was solidly positive, though, with gainers beating losers more than 3 to 1 on the New York Stock Exchange. Volume was typically week for a session approaching the holiday weekend, with just 762 million shares changing hands.
In corporate news, Yahoo is considering a plan to cut stakes in its prized Asian assets as part of a complicated share transaction valued at roughly $17 billion, sources familiar with the matter told the New York Times on Wednesday, winning nods of approval from Wall Street.
Elsewhere, Vivus shares came under pressure after the pharmaceutical company revealed concerns over its diet drug Qnexa. Leerink Swan cuts its view on Vivus to "market perform."
Bed, Bath & Beyond shares also fell after the company reported earnings that beat expectations but on weak revenue growth.
And American Greetings shares plunged on concerns over a huge earnings miss and weak profit margin.
On the upside, Micron Tech shares surged as traders shrugged off an earnings miss and instead focused on increasing sales volume.
Gold struggled to reverse its late-year downturn, with mining stocks such as Newmont feeling the pain.
Airbus is on course to end 2011 with well over 1,600 orders, pushing Boeing to the lowest market share of their 40-year rivalry.
European Commission antitrust officials were not swayed by Deutsche Boerse and NYSE Euronext's last-ditch arguments to save their $9 billion deal, sources told Reuters. This makes it increasingly likely the exchange operators will have to take their campaign directly to the commissioners.
In other markets, the US dollar gained slightly against a basket of world currencies and edged lower against the euro . Bond yields decoupled from stock prices, with the 10-year benchmark rate falling to 1.94 percent despite rising equities.
The FTSEurofirst 300 index rose on Thursday in thin trade, with banking stocks featuring among the top performers.
Markets finished mixed Wednesday on misgivings over the European Central Bank's three-year loan program for banks to buy sovereign debt, and as big tech names took a sharp fall. In a positive for market technicians, stocks finished close to their session highs and mostly held the massive 300-plus point rally Tuesday on the Dow.
"The fact that the Dow here in the US had risen by plus-300 points Tuesday and has given nothing back since is really quite impressive," said Dennis Gartman, author of The Gartman Letter and a hedge fund manager. "And we might say the same of the strength earlier this week in Europe, which has been followed by a very quiet correction."