Stocks move higher as unemployment claims drop

CHRISTINA REXRODE AP Business Writer Published:

NEW YORK (AP) -- Stocks rose on Thursday on signs of strength in the U.S. job market, but continuing uncertainty about Greece's debt problems kept the gains in check.

The Dow Jones industrial average was up 111 points to 12,892 shortly after noon. That was a turnaround from Wednesday, when the index lost 97 points. Another surge could push the Dow to 13,000, a level it hasn't seen since early 2008, before the financial crisis imploded.

The broader Standard & Poor's 500 rose 9 points to 1,353 and the Nasdaq composite was up 23 points at 2,939.

The Labor Department said weekly applications for unemployment benefits dropped for the fourth time in five weeks to the lowest point since March 2008. That was when the jobless rate was just 5.1 percent, far below the current rate of 8.3 percent.

The stronger reading on the jobs market led traders to sell Treasury bonds, a sign that they're more comfortable plowing money into riskier assets like stocks. That pushed bond prices lower and sent the yield on the 10-year Treasury note sharply higher, to 1.99 percent from 1.93 percent. That's a measure of the interest rate the government has to pay to get investors to buy the bonds.

The market has been rising slowly but steadily for most of the year, as investors shake off some of last year's fears about a second recession and the S&P's August downgrade of U.S. debt, which proved to have minimal real effect on the economy.

John Burke, president of Burke Financial Strategies in New Jersey, thinks some of the calm has been caused by the Federal Reserve flooding the market with cheap money. The Fed has promised to keep interest rates near zero for the next several years, which could prop up the economy rather than force the U.S. to solve its growing budget deficit problem.

"They're pushing the problem off," Burke said. "We're fine today, we'll avoid (another) recession, but what's that going to do to us when the term is up?"

European markets didn't do as well. As it has for weeks, deal-making on bailing out Greece dawdled on without any real clarity. Greece is trying to negotiate with its lenders, including the 16 other countries that use the euro, for breaks on some of its loans coming due next month. If it doesn't get the bailout, it will spiral into bankruptcy and could be forced to leave the euro.

Stock indexes in the U.K., Germany and Spain slid, though the ATHEX index in Greece climbed 1.1 percent.

The euro rose slightly to $1.31, a sign of improving confidence in Europe. The euro had been rising more or less steadily since mid-January, but stalled out late last week around $1.33. Portugal, another troubled euro zone country, reported 14 percent unemployment, the highest on record.

Some of the lenders, including richer euro zone countries like Germany, have complained that Greece hasn't lived up to previous commitments to cut spending, a hard task in a country where citizens have grown used to extravagant government spending.

Gas prices could be a lurking problem, rising as Iran threatens to crimp its exports. The average price for a gallon of gasoline is around $3.52, up 23 percent since Jan. 1. That's the highest ever for this time of year, and experts say it could climb to $4.25 a gallon by late April.

In other stocks making big moves:

-- General Motors rose 7 percent, boosted by news that it had earned its highest profit ever in 2011, just two years after the auto giant teetered near collapse and had to be rescued by taxpayer money. The profit masked some troubling statistics, including losses in Europe and South America, but investors didn't seem to mind.

-- Jam maker J.M. Smucker plummeted 9 percent after the company missed analysts' estimates for net income and revenue.

--Molson Coors rose 4 percent after the beer maker beat analysts' expectations, helped by higher sales of Modelo beer in Japan and Coors Light in Latin America and China.