Stocks edge higher after jobs data, retail sales

NEW YORK -- Stocks edged higher in light trading Thursday as investors found little in a series of economic reports to push the market forward after a four-day slide.

The Labor Department said the number of people filing for unemployment claims fell last week by 4,000 to 570,000 while the number of those receiving benefits rose. Economists had been expecting a bigger drop and the report reminded investors that a recovery in employment will be difficult.

Investors are also cautious ahead of the government's August employment report on Friday. Many analysts consider unemployment the biggest obstacle facing a recovery in the economy because consumer spending accounts for about 70 percent of U.S. economic activity.

Monthly sales reports from retailers Thursday underscored that while some consumers are starting to open their wallets, most remain focused on necessities. Overall sales are still weak, but Gap Inc. and Costco Wholesale Corp. posted results that topped investors' expectations.

Sales fell 2.1 percent in August for a compilation of 31 retailers compiled by The International Council of Shopping Centers and Goldman Sachs. That was better than an expected drop of 3.5 percent to 4 percent.

Recent economic reports have signaled modest improvement in areas like housing and manufacturing but economists caution that the economy remains weak.

The Institute for Supply Management said its service index, which covers hospitals, retailers, financial services companies and more, pushed closer to signaling growth in August but still indicated contraction for the 11th straight month.

Investors have already placed big bets on a recovery in the economy and trading has been jittery in the past two weeks on fears that the economy will have trouble pulling out of the longest recession since World War II.

Major stock indicators like the Standard & Poor's 500 index jumped more than 50 percent from 12-year lows in early March. Thursday's modest advance follows a four-day slide that has shaved 300 points, or 3.1 percent, from the Dow Jones industrial average.

"We had a bit of reality catching up with expectations," said Bill Stone, chief investment strategist at PNC Wealth Management, referring to the recent selling. He expects the market to "grind around" while it waits for the unemployment report on Friday.

In late afternoon trading, the Dow rose 13.60, or 0.2 percent, to 9,294.27. The S&P 500 index rose 2.86, or 0.3 percent, to 997.61, while the Nasdaq composite index rose 6.17, or 0.3 percent, to 1,973.24.

About two stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 756 million shares compared with 936.1 million shares traded at the same point Wednesday.

Bond prices fell. The yield on the 10-year Treasury note rose to 3.33 percent from 3.31 percent late Wednesday.

Analysts say the dearth of market participants going in to the long Labor Day weekend has added to the market's choppiness.

"I wouldn't want to read too much into anything until we get into next week," said Alan Brown, group chief investment officer at Schroders in London, referring to the light trading volume.

Investors are focused on Friday's employment report. In July, job losses slowed and the unemployment rate unexpectedly fell but analysts widely expect unemployment will rise even as the economy improves.

Many economists expect the nation's unemployment rate will have risen to 9.5 percent in August, from 9.4 percent in July. The number of layoffs are expected to slow to 225,000, from 247,000.

Among retailers, Gap rose $1.43, or 7.3 percent, to $21.12 and Costco advanced $4.06, or 8 percent, to $54.71. Abercrombie & Fitch Co. slid $1.43, or 4.5 percent, to $30.66.

The dollar rose against most other major currencies, while gold prices extended their recent climb.

Light, sweet crude fell 9 cents to settle at $67.96 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies rose 2.57, or 0.5 percent, to 558.40.

Overseas, Britain's FTSE 100 fell 0.4 percent, Germany's DAX index slid 0.4 percent, and France's CAC-40 fell 0.6 percent. Japan's Nikkei stock average fell 0.6 percent.