Stocks rose Thursday after three mostly down days as traders bought beaten-down financial and technology stocks.
The buying was subdued after a worse-than-expected weekly unemployment report added to concerns that the economic recovery might not come as quickly as hoped.
The market is down sharply this week as investors worry that the optimism that fed a massive spring rally might have been premature. The Standard & Poor's 500 index is still 32% above the 12-year low it hit in early March.
The Dow Jones industrial average ended Thursday up 46 points, but lagged gains by the S&P 500 index and Nasdaq composite index. Financial stocks rose after falling earlier in the week and lifted the KBW Bank Index 3.7%.
Technology shares gained after software maker CA said its fiscal fourth-quarter earnings rose as cost-cutting compensated for a drop in revenue.
The advance came as the market grappled with another reminder of the strained job market. The Labor Department's weekly data showed more workers filing for unemployment claims. New claims jumped to 637,000, above what economists had forecast.
The overall number of people seeking unemployment benefits grew faster than expected, rising to 6.6 million, while continuing claims hit a 15th straight weekly record.
Analysts had expected some rebound after stocks tumbled Wednesday, sending the S&P 500 index down 2.7%. The market was shaken by a Commerce Department report that retail sales fell unexpectedly in April for the second straight month, and by a separate report that showed home foreclosures rising.
The twin hits to two key areas of the economy — consumer spending and the housing market — have led investors to drop stocks this week and seek the shelter of bonds. That put on hold a powerful rally that carried the market through March and April.
"Expectations got overblown and the harsh unfortunate reality is that unemployment continues to climb and that consumers remain under pressure," said Stuart Schweitzer, global markets strategist at J.P. Morgan's Private Bank. "The green shoots of recent weeks are minor compared with the field of dandelions still present in the economy."
The Dow rose 46.43, or 0.6%, to 8,331.32. The S&P 500 index rose 9.15, or 1%, to 893.07, while the Nasdaq rose 25.02, or 1.5%, to 1,689.21.
More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 1.5 billion shares.
"I think we're at a crossroads. I'm looking for more evidence to say that this is a sustainable rally," said Jack Ablin, chief investment officer at Harris Private Bank.
That evidence may be hard to come by in the next two weeks. With first-quarter earnings reports winding down, the government's stress test results out of the way and few economic reports expected, investors may feel like they're in a bit of a data vacuum. And when there's little information to go on, a nervous market tends to fall.
Regional banks Fifth Third Bancorp and Huntington Bancshares showed some of the strongest gains. Fifth Third rose 50 cents, or 7.1%, to $7.52. Huntington rose 31 cents, or 7%, to $4.72.
CA, which makes software to run information technology systems, rose 95 cents, or 5.5%, to $18.27.
Wal-Mart Stores fell 93 cents to $49.10 after its first-quarter results failed to excite the market. Kohl's Corp. fell 71 cents to $41.24 after its report. But retailerUrban Outfitters rose 21 cents to $19.51 after posting results that beat forecasts.
Michael Strauss, chief economist and market strategist at Commonfund, said some traders had been expecting an increase in weekly unemployment claims because of planned shutdowns among the nation's automakers.
Ford Motor rose 20 cents, or 4%, to $5.16 after its chief executive, Alan Mulally, said at the company's annual meeting the automaker is slashing costs and boosting development of safe, fuel-efficient vehicles. Shareholders approved the company's request to issue stock to help pay some of its health care obligations to retired autoworkers.
In other trading, the Russell 2000 index of smaller companies rose 8.89, or 1.9%, to 480.71.
Bond prices were mixed after rising a day earlier. The yield on the 10-year Treasury note, a widely used benchmark for loans including home mortgages, fell to 3.09% from 3.12% late Wednesday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 60 cents to settle at $58.62 per barrel on the New York Mercantile Exchange.
Overseas, Britain's FTSE 100 rose 0.7%, Germany's DAX index advanced 0.2%, and France's CAC-40 rose 0.1%. Japan's Nikkei stock average fell 2.6%.