Stocks finished modestly higher Thursday, posting a three-day rally, thanks to a better-than-expected jobless claims report and as financials rallied following BofA's earnings report.
Still, gains were largely muted throughout the session as investors hesitated to jump in following the recent run-up in stocks.
"When the market marches higher as has for the last three weeks, it’s not a news event that triggers the pullback, it just appears to come out of nowhere and of course when you least expect it," wrote Elliot Spar, market strategist at Stifel Nicolaus, in his daily note.
The Dow Jones Industrial Average rose 45.03 points, or 0.36 percent, to close at 12,623.98, led by BofA . Pfizer was the biggest loser on the blue-chip index.
The S&P 500 added 6.46 points, or 0.49 percent, to finish at 1,314.50. The Nasdaq gained 18.62 points, or 0.67 percent, to end at 2,788.33.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, slipped near 20.
Among key S&P sectors, financials and consumer discretionary rose, while utilities lagged.
Bank of America rallied after the banking giant met earnings expectations and topped revenue estimates.
Meanwhile, rival Morgan Stanley posted a decline in revenueas the investment bank lost money in the fourth quarter due to a big charge related to a legal settlement. Still, the bank still topped earnings expectations, sending shares higher.
“There’s potential for more [market] upside,” said Brian Gendreau, market strategist of Cetera Financial Group. “Absence of bad news from Europe seems to be good news and it would help markets if we get any easing of the political paralysis.”
Weekly jobless claims dropped 50,000 to a seasonally adjusted 352,000 last week, according to the Labor Department, tumbling to a near four-year low. And consumer prices were flat for a second straight month in December, according to the Labor Department as gasoline fell and food rose moderately.
Meanwhile, housing starts declined 4.1 percent to a seasonally adjusted annual rate of 657,000 units in December, according to the Commerce Department, throwing cold water on recent recovery hopes in the housing sector.
“The economic data this morning was mixed…While as a whole, everything looks consistent with trends we’ve been seeing but many economists still think there will be a deceleration of growth in 2012,” said Gendreau. “The economy is still facing headwinds.”
