US stocks held modest gains early Thursday afternoon as a surprising drop in weekly jobless claims raised hopes for an economic rebound and investors focused on pockets of strength in a mixed bag of earnings reports.
Early Thursday morning, the government reported new claims for unemployment insurance fell 29,000 to 386,000 last week, the lowest level since the week of Feb. 8 and far below economists' forecasts of 413,000.
The report, while typically volatile in July, helped give gave investors confidence that the moribund jobs market may be stabilizing and the economy may have finally shaken the lingering effects of the 2001 recession.
Robust results from industry leaders like AT&T Corp, Dow Chemical Co and Computer Associates International Inc also improved the market's mood.
The reasonably favorable results from corporate America so far in the summer earnings reporting period are underpinning share prices, said David Sowerby, market strategist and portfolio manager at Loomis Sayles.
"I'm not going to declare victory, but we've seen stronger earnings for three quarters now, and we've also seen robust corporate cash-flow growth for the past year," Sowerby added.
The Dow Jones industrial average was up 40 points, or 0.43 percent, at 9,234. The broader Standard & Poor's 500 Index was up 7 points, or 0.68 percent, at 995. The technology-laced NASDAQ Composite Index was up 12 points, or 0.67 percent, at 1,731.
Thursday's jobless benefits report marked the first time since the week of Feb. 8 that initial claims fell below 400,000 -- a level economists say indicates a soft labor market.
But a US Department of Labor spokesman urged caution in reading too much into one week's figure, as this month is a volatile month due to seasonal layoffs in industries like autos and textiles.
AT&T Corp jumped after it said it swung to a second-quarter profit from a year-earlier loss and raised its dividend. However, revenue fell amid slack customer demand and pricing pressures.
Shares of AT&T, the No. 1 US long-distance telephone company, rose 4.8 percent, or US$0.93, to US$20.46 and were the blue-chip Dow's biggest percentage gainer.
Dow Chemical Co, the largest US chemicals maker, jumped after reporting its second-quarter profit soared 65 percent, driven by cost cuts, price increases and higher agricultural products sales. Its shares gained US$2.00, or 6.3 percent to US$33.95.
Software company Computer Associates International Inc soared after it posted a fiscal first-quarter profit instead of a loss. It also raised its full-year profit target.
CA shares soared US$3.68, or 16.6 percent, to US$25.92 and were among the NYSE's top percentage gainers.
But Raytheon Co fell after the defense contractor said it swung to a quarterly net profit from a loss last year, but earnings from continuing operations fell on higher pension costs. Its shares fell US$1, or 3 percent to US$32.56.