Buyers Drift Back to Stocks

The Nasdaq ends 2% higher, while the other averages post modest gains.
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Updated from 4:09 p.m. EDT

Stocks ended higher across the board Thursday, as investors cheered some better-than-expected jobless data and portfolio managers added to positions before the end of the quarter.

The

Dow Jones Industrial Average

ended up 67 points, or 0.7%, at 9079. The

Nasdaq

was up 31 points, or almost 2%, at 1634, while the

S&P 500

was up 10 points, or 1%, at 986.

"I think we've got some window dressing here," said Peter Cardillo, chief market strategist at Global Partners Securities. "The fact that the unemployment numbers went down is certainly a positive, too."

At the end of the quarter, money managers typically buy stocks that have done well in order to make their portfolios look more attractive. That they may have only been holding the stocks for a short time is usually downplayed in the quarterly statement (although investors can see from the fund's returns how well the manager really performed).

While a downward revision of first-quarter gross domestic product unnerved some investors Thursday, an encouraging report on weekly jobless claims helped offset some of the concerns.

GDP was adjusted to 1.4% from 1.9%, but weekly jobless claims dropped to 404,000 in the latest week, compared to 412,000 in the previous week. Economists had been expecting a level of 415,000. The four-week moving average, which strips out weekly fluctuations, declined 5,250 to 428,250.

Meanwhile, the

Federal Reserve

released the minutes of its May policy meeting, in which it decided to leave rates unchanged. Although the central bank felt that the economy was weak enough to warrant a rate cut back then, it postponed the move because "not enough time had elapsed since the end of the Iraqi war to sort out the underlying forces at work in the economy."

On Wednesday, stocks and bonds declined after the Fed cut interest rates by a quarter percentage point to 1%, the lowest level since 1958. Stock investors were hoping for a more optimistic policy statement, while bond investors had been pricing in a more aggressive cut. Bonds were sharply lower Thursday, with the yield on the 10-year Treasury note rising to 3.52%.

"We feel that the Fed should have done more," said Tom Girard, managing director at Weiss, Peck & Greer. "It could have used 'shock and awe,' rather than the less aggressive approach that it actually took. A 50-basis-point cut would have sent a strong message to the market, but with a 25-basis-point ease and the accompanying statement, questions still linger about the Fed's future actions."

In corporate news,

General Electric

(GE) - Get Report

said

American International Group

(AIG) - Get Report

agreed to buy its Japanese life insurance unit and its U.S. car and home insurance business for $2.15 billion. GE was up 8 cents, or 0.3%, at $29.15.

Another deal that could be in the works is

Lehman Brothers'

(LEH)

possible purchase of

Neuberger Berman

(NEU) - Get Report

, a money management firm, for about $3 billion in stock and cash, according to media reports. Lehman was down 2%, or $1.71, at $67.77.

Lucent

(LU)

was up 9 cents, or 4.6%, at $2.03 after the telecommunications giant secured a "multimillion dollar" contract to supply equipment to E-plus, Germany's third-largest wireless provider.

Also from the telecom arena, equipment maker

Juniper Networks

(JNPR) - Get Report

said late Wednesday it signed a multiyear deal with

Verizon

(VZ) - Get Report

to provide equipment to direct Internet traffic. Juniper was up 0.6%, or 7 cents, at $12.57.

Elsewhere,

ImClone

(IMCLE)

received a $3 million payment from

Merck KGaA

for achieving a clinical development milestone on its drug Erbitux. ImClone shares were up $1.40, or 4.4%, at $33.50.

On the earnings front,

Research In Motion

(RIMM)

, maker of handheld email devices, said it narrowed its loss in the fiscal first quarter, beating Wall Street estimates. The company went on to raise its second-quarter earnings and sales estimates. Analysts at Needham downgraded the stock to sell from hold, saying rival

Dell

(DELL) - Get Report

will pressure the company's market share with new products. But ThinkEquity raised its rating on the stock to overweight from equal weight. Research In Motion was down 1.5%, or 35 cents, at $22.49.

Manugistics Group

(MANU) - Get Report

, a maker of business software, said it expects revenue in the current quarter ending in August to fall short of analysts' estimates. Shares were down 10.6%, or 55 cents, at $4.69.

Meanwhile, network-equipment maker

3Com

(COMS)

said its fiscal fourth-quarter loss widened from a year earlier, and said it sees no material improvement in the current quarter. Shares were down 5 cents, or 1%, at $4.77.

American Airlines

(AMR)

was up 20%, or $1.82, at $10.90 after posting positive cash flow in May. Credit Suisse First Boston upgraded the stock to outperform from neutral and kept a price target of $18.

CNet Networks

(CNET) - Get Report

was up 17%, or 85 cents, at $5.76 after Smith Barney raised its rating on the stock to outperform from underperform, saying it expects the firm to benefit from growth in advertising.

Circuit City

(CC) - Get Report

gained 8%, or 68 cents, at $8.66 after it rebuffed an offer by shareholder Carlos Slim Helu to buy the outstanding shares for $8 a piece. The Slim family currently owns 9.2% of the stock.

In other economic news Thursday, the number of help-wanted ads in major U.S. newspapers remained flat in May, according to the Conference Board. The Federal Reserve Bank of Chicago said its National Activity Index improved in May and the three-month moving average increased from recession territory.

Overseas markets were mixed, with London's FTSE 100 down 0.6% at 4041, and Germany's Xetra DAX up 1.3% at 3241. In Asia, Japan's Nikkei closed down 0.1% at 8923, while Hong Kong's Hang Seng shed 0.2% to 9606.

Crude oil futures were lower in New York and the dollar was stronger against the yen and euro amid speculation that the U.S. economy is starting to recover.