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US STOCKS-Wall Street climbs on lower jobless claims, Sprint soars

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* Sprint volume surges, shares jump on Softbank deal reports

* Citigroup sees US stocks as "overweight"

* Safeway down after missing Wall St estimates

* Indexes up: Dow 0.54 pct, S&P 0.73 pct, Nasdaq 0.68 pct

(Updates to mid-morning)By Atossa Araxia Abrahamian

NEW YORK, Oct 11 (Reuters) - U.S. stocks rose on Thursdayafter data showed initial jobless claims at their lowest in morethan four and a half years, pointing to signs of continuedimprovement in the jobs market.

Sprint Nextel Corp

shares jumped 19 percent to $5.98on news Japan's Softbank Corp

was in talks to buy amajority stake in the wireless carrier. A transaction wouldrepresent a new shakeup in the rapidly changing U.S. wirelessmarket and possibly reflect a more conducive environment forcorporate deals.

More than 320 million shares of Sprint Nextel changed handsin U.S. trading by 11:30 a.m. ET (1530 GMT), making it thebusiest day in the stock's history.

Clearwire Corp, in which Sprint holds a majorityinterest, surged 38 percent to $1.79. MetroPCS

shares

dropped 6.2 percent to $11.29 as a Softbank deal would rule outSprint making a counter-bid.

"The Sprint-Nextel deal shows there are deals to be had,"said Brian Amidei, managing director and partner at wealthmanagement firm HighTower Advisors. "It shows there is stillcorporate growth, and that companies are looking to find ways togrow their footprint even in this economy."

The number of Americans filing new claims for unemploymentbenefits last week dropped by 30,000 to a seasonally adjusted339,000, against the 370,000 economists had predicted.

The jobs report follows last week's report that saidSeptember's unemployment rate fell to 7.8 percent.

The gains come after the S&P 500's biggest four-day dropsince late July. The benchmark is down 2 percent amid concernabout the effect of slowing world growth. The S&P 500 is downdropped 0.6 percent thus far in October.

The Dow Jones industrial average

was up 72.49 points,or 0.54 percent, at 13,417.46. The Standard & Poor's 500 Index

was up 10.44 points, or 0.73 percent, at 1,443.00. TheNasdaq Composite Index

was up 20.84 points, or 0.68percent, at 3,072.62.

Citigroup upgraded its stance on U.S. equities to"overweight" in a note this morning, citing cheap equityvaluations and aggressive central bank actions to stimulate theeconomy.

Shares of supermarket chain Safeway Inc

, thesecond-largest U.S. supermarket chain, fell nearly 5 percentafter it missed Wall Street's targets. Competitor Walmart

was up 0.5 percent to $75.74 after hitting a 52-weekhigh on Wednesday.

Earlier this month, the National Retail Federation forecast4.1 percent growth in sales for the coming holiday season,compared to 5.6 percent growth in 2011.

Other data showed the U.S. trade deficit widened in Augustto $44.2 billion. U.S. exports fell for a fifth consecutivemonth and imports declined slightly, hinting at weaker U.S. andglobal demand.

(Editing by Bernadette Baum)

((atossa.abrahamian@thomsonreuters.com)(+1 646 2237089)(Reuters Messaging:atossa.abrahamian.thomsonreuters.com@reuters.net))

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