Stocks Leave Jitters Behind, Trade Higher

All the major indices are trading higher as investors welcome economic data and dropping crude oil prices.
By Sarina Penn ,

Updated from 10:03 a.m. EDT

Stocks in New York recovered from early-morning jitters to trade higher Thursday as traders digested a round of mostly in-line economic data and sliding oil prices.

The

Dow Jones Industrial Average

traded choppily for much of the morning before rising 46 points, or 0.4%, to 12,640. The

S&P 500

added 7 points, or 0.5%, to 1398, and the

Nasdaq Composite

was up 14 points, or 0.6%, at 2500.

Neil Hennessy, president and portfolio manager with Hennessy Funds, blamed pure emotion for many of these erratic moves. "Everybody is trying to figure out where it's going just simply on their gut feelings on a daily basis," he said.

One of the early points of focus was the Commerce Department's second report on U.S. gross domestic product for the first quarter. The initial reading indicated that GDP grew 0.6% from January through March, but the revision showed a 0.9% increase, matching analysts' forecast.

The report will undergo another possible revision before it's finalized, but so far it seems to indicate that the economy managed to avoid contraction in the beginning of the year -- which, if accurate, would run contrary to what many economists have predicted.

"It's pretty hard to have a recession when the economy is expanding by almost a percent," said Richard Yamarone, chief economist with Argus Research. "I don't think we'll knock the cover off the ball in the second quarter, but there are a lot of signs that the economy is actually gathering some footing."

"It defies what everybody's saying out there," said Hennessy. "The economy grew." He also believes that, even if the generally accepted definition of a recession is still in tow -- two quarters' worth of contraction -- such a recession would be a mild one.

Separately, the Labor Department said initial jobless claims rose to 372,000, slightly ahead of the 370,000 estimate.

Investors were also dealing with news that Dallas

Federal Reserve

president Richard Fisher, a member of the central bank's Federal Open Market Committee, said interest rates could be hiked "sooner rather than later" if inflationary expectations continue to worsen, "even in the face of an anemic economic scenario."

The Fed has eased its overnight lending rate by 325 basis points since September. For his part, Fisher has a reputation as an inflation hawk who hasn't always been convinced about the necessity to lower rates.

The new day also saw commodities backing off early on, with crude recently losing $1.97 at $129.06 a barrel. Gold futures shed $19 to $881.50 an ounce. The U.S. dollar climbed 0.6% against the euro and firmed by 0.5% against the yen.

On the corporate side,

Sears Holdings

(SHLD)

swung to a surprise loss in the fiscal first quarter. Excluding items, the retailer lost 53 cents a share on dwindling revenue of $11.07 billion. Sears, which operates its namesake chain as well as Kmart, also added $500 million to its stock-buyback authorization. Shares were down 3.8%.

Big-box discount retailer

Costco

(COST) - Get Report

, meanwhile, said its earnings soared by nearly one-third to $295.1 million compared with a year earlier, when the company's bottom line was weighed down by a hefty charge. Costco topped analyst estimates for earnings and revenue. The stock reversed early gains and recently gave up 1.5%.

Shares of Dow component

General Motors

(GM) - Get Report

were little changed following reports that the automaker is considering further restructuring moves, possibly lowering production or cutting unpopular vehicle lines. That follows another report this week that

Ford

(F) - Get Report

is looking to cut around 2,000 jobs.

Elsewhere, media reports said that the chief executives of United Airlines operator

UAL

(UAUA)

and

US Airways

(LCC)

are scheduled to meet today in order to discuss their potential merger. On Wednesday, news had surfaced that the proposed combination was falling apart. UAL shares rose 0.8% as U.S. Airways climbed 2.7%.

Also,

Bear Stearns

(BSC)

shares rose 1.8% after shareholders approved the plan by

JPMorgan Chase

(JPM) - Get Report

to acquire the investment bank for $10 a share. JPMorgan was adding 2%.

Elsewhere,

Men's Wearhouse

(MW)

slid 8% after the suits purveyor cut its full-year outlook. The retailer posted a shrinking profit for the most recent quarter and missed expectations.

Treasury prices were falling. The 10-year note sank 23/32 in price to yield 4.10%, and the 30-year bond tumbled 1-4/32 in price, yielding 4.76%.

The major overseas markets were mainly on the rise. In Asia, Tokyo's Nikkei 225 surged 3% overnight, and the Hang Seng Index in Hong Kong climbed 0.6%. As for European exchanges, London's FTSE 100 and the Paris Cac rose 0.1% apiece as Germany's Xetra Dax ticked up 0.2%.

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