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Stocks Pull Off a Gain After Late Rally

Stocks eked out a gain after a late rally Thursday as investors cheered an encouraging business-inventories report, the latest sign that the recession is winding down.

It was a rocky session after the day's mixed bag of news: Wal-Mart beat earnings expectations but some of the other economic data was lousy.

The Dow Jones Industrial Average rose 36.58, or 0.4 percent, adding on to its 1.3-percent gainfrom Wednesday. The Nasdaq climbed 0.5 percent, and the S&P 500 advanced 0.7 percent.

Thursday's trading got off to a rocky start amid a technical glitch on the New York Stock Exchange. The exchange said customers "are currently experiencing issues" with acknowledgments of order entries, causing a delay in orders and trades.

"It was incredibly frustrating as I was attempting to cancel an order and had no idea if the cancel went through or not and really did not want to have double the amount of shares," said one trader, Harry. "When I finally was able to get a confirmation, 30 minutes had gone by and the stock price had moved in a 70-cent range."

The NYSE ultimately canceled the orders that were pending from the outage, but it did little to restore traders' faith in the system.

"NYSE's attitude is they are responsible for nothing," Harry said, adding: "Probably a good stock to go short. I know I intend to try and have my orders go elsewhere."

Business inventories dropped 1.1 percentto a seasonally adjusted $1.35 trillion, helped by a 0.9-percent increase in sales. The inventory-to-sales ratio fell to 1.38 from 1.41. But jobless claims rose unexpectedly by 4,000 to 558,000.

A couple of retailers beat earnings expectations, including retail titan Wal-Mart.

Wal-Mart reported a flat profit, as the strong dollar hurt the value of international sales and stimulus checks last year made for tough year-over-year comparisons, but stilltopped expectations. Its shares rose 2.7 percent.

Anddepartment-store chain Kohl's narrowly beat estimates, helped by cheaply-priced and trendy merchandise. Shares rose 0.2 percent.

Overall, the retail sector finished mixed, with Macy's down 1.5 percent, after the government reported its measure of retail sales slipped 0.1 percent, after increasing an upwardly-revised 0.8 percent in June. Economists had expected a 0.7-percent increase for July, helped by the "Cash for Clunkers" program.

“Many families postponed the bulk of their back-to-school shopping this year, possibly waiting to take advantage of their state sales tax holiday or hoping for additional discounts,” said Rosalind Wells, chief economist of the National Retail Federation. “Hopefully, retailers' aggressive promotions and reduced inventory levels will make for a better August and shield retailers from a disappointing season.”

Home Depot shares rose 1.8 percent after Jefferies raised its price target on the stock to $32 from $29 and FBR raised its rating to "outperform" from "market perform."

Jefferies also raised its price target on Home Depot rival Lowe's , but FBR cut its rating on the stock to "market perform" from "outperform." Lowe's shares gained 2 percent.

High-end retailer Nordstrom will report earnings after the bell. Its shares climbed 1.1 percent ahead of the news.

Bank stocks led the board once again, with Bank of America up 6.7 percent following news that hedge-fund titan John Paulson snapped up 168 million BAC shares.

CIT Group jumped 13 percent after the lender said it has adopted a tax-benefits-preservation plan, a move designed to preserve shareholder value, and signed an agreement to report regularly to the Fed.

E*Trade shares skidded 4.1 percent after Citadel Investment Group, the hedge fund that had injected capital into the struggling firm, said it would slash its investment in the company by more than two-thirds in the next few months.

In tech land, JPMorgan raised its price target for both Dell and Hewlett Packard. Dell's target was raised to $13 from $10, while HP was lifted to $49.50 from $40.

Dell rose 3.3 percent, and HP shares gained 0.4 percent.

Similarly, Barclays Capital raised its price target for Apple to $208 from $188, citing solid product pipeline such as the iPhone and prospects for strong free cash flow. Apple shares advanced 1.9 percent.

Europe's two biggest economies, France and Germany, posted surprise returns to growth in the second quarter, boosting investor optimism further.

Today's $15 billion auction of 30-year bonds was met with strong demand, suggesting investors aren't totally convinced of the recovery's trajectory. The auction fetched a high yield of 4.541 percent, slightly higher than expected, but the bid-to-cover ratio was 2.54, reflecting higher-than-usual demand.

This came after a mediocre sale of 10-year notes on Wednesday.

Offering some encouragement for the global economy, German and French gross domestic product each rose by 0.3 percent in the second quarter, bringing the countries out of recession. Economists had expected a 0.3-percent contraction in both countries.

Still to Come:

THURSDAY: Earnings from Nordstrom after the bell
FRIDAY: CPI; industrial production; consumer sentiment; Earnings from JCPenney

Send comments to cindy.perman@nbcuni.com.