Traders cash in winnings after week's huge gains

Financial stocks mostly fell after big gains Wednesday and ahead of the government report cards on banks. The tests, designed to determine which banks would need a stronger capital base if the economy weakens, are at the crux of the Obama administration's plan to fortify the financial system. The market rallied this week ahead of the results, despite some initial concerns that the tests would show more pain in the industry.

In economic news, new applications for unemployment benefits fell last week to the lowest level in 14 weeks. The Labor Department's tally of new jobless claims fell to 601,000 from 631,000 the previous week, well below the 635,000 economists had been expecting. A four-week moving average of initial jobless claims that smooths out fluctuations fell from a high in early April.

The employment reading follows a better-than-expected private snapshot of the labor market on Wednesday and comes a day ahead of the government's April employment report. It is often regarded as the most important economic news each month because a drop in unemployment could bolster everything from banks to retailers if consumers can continue to make mortgage payments and go shopping.

There were also reports showing that productivity rebounded slightly in the first quarter while wage pressures eased.

Federal Reserve Chairman Ben Bernanke, addressing a Fed conference, said a broader approach is needed for strengthening oversight of the banking system and said information gleaned from big bank "stress tests" should pave the way for improvements on that front.

The dollar rose against the euro and the British pound after the European Central Bank cut its key interest rate a quarter point to 1%. Gold prices rose.

Light, sweet crude rose $1.08 to $57.42 per barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average jumped 4.6%. Britain's FTSE 100 rose less than 0.1%, Germany's DAX index fell 1.6%, and France's CAC-40 fell 1%.

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