Tech shares led U.S. stocks higher Thursday, despite an unexpected jump in jobless claims that resurfaced some concerns about the economy and sent bond yields lower.
The Dow Jones Industrial Average rose 25.35 points, closing at 34,823.35. The S&P 500 climbed 0.2% higher, reaching 4,367.48. The tech-heavy Nasdaq Composite led the markets with a 0.3% gain, ending the day at 14,684.60.
Investors jumped back into their favorite tech stocks as optimism about the sector grows ahead of big earnings reports next week for some of the largest names in the space. Salesforce gained 2.5% while Amazon and Facebook climbed 1.4% higher.
"Between interest rates falling, the edge coming off of growth expectations and the COVID resurgence adding to some of the uncertainty, tech stocks look like a natural place that investors and traders are going to gravitate to until we get more resolution along some of these fronts," said Yung-Yu Ma, BMO Wealth Management's chief investment strategist.
Microsoft rose 1.6% after Citi raised its price target, saying the tech giant has the potential to beat Wall Street expectations when it reports quarterly earnings next week. Citi predicted the stock will rise more than 30% over the next year. Apple rose almost 1% after Canaccord Genuity said there was "strong demand" for Apple products ahead of its earnings next week.
The overall market continues to grind higher, led sometimes by value stocks when economic optimism is high and on days such as Thursday, tech shares take over the lead.
The Dow is up 0.3% on the week and sits less than 1% from a record high, bouncing back from a 700-point-plus rout on Monday.
Some investors believe that reopening plays will once again come back into favor and tech shares will pull back.
"This economy is still in an incredibly strong rebound, corporate revenue and profits are increasing sharply, and it's a pretty positive backdrop," said Ron Temple, head of U.S. equities and co-head of multi-asset investing at Lazard Asset Management. "That means interest rates in the bond market are too low and if we start to see the yield curve really steepen, that's a challenge for the companies that are driven by growth, that hope they'll make a profit in five to 10 years," like tech stocks.
"That's a negative headwind for those companies, and it's probably a positive story for the stocks traditionally viewed as more value oriented stocks," he added.
Stocks were under pressure earlier in the day after jobless claims unexpectedly rose to 419,000, higher than the 350,000 economists polled by Dow Jones estimated and more than the upwardly revised 368,000 from the previous period.
The 10-year Treasury yield ticked lower to 1.265% on the poor jobs data. The rate dropped to a 5-month low of 1.17% earlier in the week.
Still, a strong second-quarter earnings reporting season continues, with American Airlines posting a profit for the period, snapping a streak of five straight quarters with losses, thanks to the recovery in travel demand and government aid. The shares are down 1.1% on Thursday. Similarly, Southwest Airlines reported a quarterly profit, but the carrier's stock closed 3.4% lower.
Union Pacific's shares added more than 1% after the railroad company reported second-quarter net income of $1.8 billion or $2.72 per diluted share. That's up from $1.1 billion, or $1.67 per diluted share in the year-ago quarter.
Texas Instruments slid 5.3% after the chipmaker topped expectations for the second quarter, but warned that third-quarter results could fall short of analysts' estimates.
So far, 15% of the S&P 500 has reported earnings, with 88% beating earnings estimates, according to Refinitiv. Of the companies that have reported, 84% have topped revenue expectations.
"The truth is investors have been very spoiled by the recent stock market performance," noted LPL Financial chief market strategist Ryan Detrick. "Incredibly, we haven't seen as much as a 5% pullback since October. Although we firmly think this bull market is alive and well, let's not fool ourselves into thinking trees grow forever. Risk is no doubt increasing as we head into the troublesome August and September months."
—CNBC's Hannah Miao contributed reporting.
Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Sign up to start a free trial today