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Stocks Jump on Signs Economy Is Getting Stronger

NEW YORK ( TheStreet) -- Major U.S. stock averages rallied Thursday, as better-than-expected economic reports outweighed disappointing quarterly results from Bank of America (BAC) and Citigroup (C).

Although bank results were dominating the fourth-quarter earnings headlines, investors were also gearing up for chipmaker Intel's (INTC). The company reported fourth-quarter income of 48 cents a share on $13.48 billion in revenue. Analysts polled by Thomson Reuters expected 45 cents a share on $13.53 billion in revenue. The stock was the biggest gainer in the Dow ahead the announcement, increasing 2.6% during Thursday's session.

The Dow Jones Industrial Average soared 85 points, or 0.63%, to 13,596. The blue-chip index has been up for five days out of six.

Breadth was positive, with winners outpacing losers 24 to six. Walt Disney (DIS), Verizon (VZ), Home Depot (HD) and Intel shares made their way to the top.

UnitedHealth (UNH) shares rose 1.4% after the company booked in-line fourth-quarter earnings of $1.20 a share on revenue of $28.77 billion. Analysts, on average, were expecting revenue of $28.2 billion.

Bank of America, JPMorgan (JPM), Wal-Mart (WMT) and Hewlett-Packard (HPQ) were the biggest percentage blue-chip decliners.

Boeing (BA) shares climbed 1.2% despite the company's 787 Dreamliner being grounded worldwide on safety concerns.

Hewlett-Packard (HPQ) shares slipped 0.58% after Wednesday's advance on a news report that potential purchasers are evaluating the company's Autonomy and EDS units.

The S&P 500 advanced 8 points, or 0.56%, to 1,481. The benchmark index traded at a five-year high at its intraday high of 1485.16.

The Nasdaq tacked on 18 points, or 0.59%, to 3,136.

In economic news, the Labor Department reported Thursday that initial jobless claims for the week ended Jan. 12 were 335,000, a decrease of 37,000 from the previous week's upwardly revised figure of 372,000 and the lowest since Jan. 19, 2008. The four-week moving average was 359,250, a decrease of 6,750 from the previous week's average of 366,000.

On average, economists were expecting initial jobless claims to slide to 365,000 and continuing claims to increase to 3.159 million.

Also, the Census Bureau said housing starts rose in December to a seasonally adjusted annual rate of 954,000 from a downwardly revised 851,000 in November. Building permits rose to a seasonally adjusted annual rate of 903,000 from an upwardly revised 900,000.

Economists were expecting housing starts to rise to a rate of 890,000 and building permits to come in at a rate of 903,000.

"We consider today's report quite strong," Jan Hatzius, the chief U.S. economist at Goldman Sachs, said of the claims numbers. "Overall, this morning's numbers on housing starts and permits were a positive surprise, and are consistent with continued broad improvement in housing market activity."

The housing and labor market data were strong "even though claims does have some caveats with adjustments, so the grand strength is challenged a bit," said David Ader, a strategist with CRT.

These data points were offsetting an unexpected negative read in the Philadelphia Federal Reserve's Business Outlook survey. Manufacturing activity contracted in the Philadelphia region in January as the Philly Fed's Business Outlook Survey fell to minus 5.8 in January from a sharply downwardly revised 4.6 in December. Economists were expecting a positive read of 5.8 for January.

In earnings news, Bank of America reported fourth-quarter profit of $700 million, or 3 cents a share, beating the average analyst estimate by a penny. Net revenue, however, came in at $18.9 billion, compared with estimates of $21 billion. Shares tumbled 4.2%.

Citigroup, the third-largest bank in the U.S., missed expectations in the fourth quarter, as higher legal expenses and lower reserve releases hurt profit. Shares were off 2.9% on Thursday.

"We do not expect much out of fourth quarter earnings reporting season," commented Scott Wren, senior equity strategist at Wells Fargo Advisors. "Sure, individual company surprises, both good and bad, are going to happen. But overall, looking at companies in the S&P 500, there probably will not be much to get excited about in this modest growth environment that Americans have been living with for the last several years."

Still, Paul Pagnato, founder of HighTower's Pagnato-Karp Group, said "we're slightly bullish this year," pending the resolution of the debt ceiling issue in the U.S.

Getting passed it is "a really, really big thing in the next 45 days. So we are going to be patient in deploying capital to [emerging markets, energy, large multi-national corporations and technology] until that debt ceiling gets resolved," said Pagnato. "But once the debt ceiling gets resolved, we really think the market will move" as much as 10% this year.

Gold for February delivery rose $7.60 to settle at $1,690.80 an ounce at the Comex division of the New York Mercantile Exchange, while February crude oil futures increased $1.25 to close at $95.49.

The benchmark 10-year Treasury was down 17/32 to raise the yield to 1.886%. The dollar was down 0.18%, according to the U.S. dollar index.

CBS (CBS - Get Report) shares surged 7.9% after the company said Wednesday that it has started converting its Outdoor Americas division, which runs billboards, into a real estate investment trust. The company will pursue a divestiture of its Outdoor operations in Europe and Asia.

BlackRock (BLK - Get Report) shares gained 4.4% after the asset management firm booked better-than-anticipated fourth-quarter earnings thanks to robust demand for its exchange-traded funds. The company also announced a 12% hike to its quarterly dividend.

Huntington Bancshares (HBAN) on Thursday announced fourth-quarter earnings that were "essentially unchanged" from the third quarter, but underlying revenue trends were quite positive. Shares rose 4.2%.

Fifth Third Bancorp (FITB) of Cincinnati on Thursday announced another quarter of very strong mortgage revenue growth and solid increases in commercial and industrial loan balances. Shares added 4.8%.

EBay (EBAY) posted fourth-quarter adjusted earnings of 70 cents a share, a penny above analysts' forecasts, and 17% higher than adjusted earnings a year earlier. Shares jumped 2.4%.

K Swiss (KSWS) shares surged 47.7% after the casual athletic footwear company agreed to be bought by South Korean retailer E.Land World for $4.75 a share, or roughly $170 million in cash.

-- Written by Andrea Tse and Joe Deaux in New York.

>To contact the writer of this article, click here: Andrea Tse.

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