Updated from 4:02 p.m. EDT

Stocks ended slightly higher Thursday in subdued trading, as investors digested discouraging weekly jobless figures.

The

Dow Jones Industrial Average

finished up 18.60 points, or 0.2%, at 9487.80, while the

Nasdaq

climbed 3.94 points, or 0.2%, to 1836.19. The

S&P 500

rose 2 points, or 0.2%, to 1020.24.

The government said claims for first-time jobless benefits rose to 399,000 in the week ended Sept. 27, reinforcing concerns that a jobless economy could slow down a recovery. This was the seventh weekly gain in the last 10 weeks. Economists had expected a rise to 395,000. Markets now foresee a weak reading in Friday's September employment report.

"We're in for a good earnings season, but that has been generated by cost-cutting, and we'll only get a sustainable recovery when companies start hiring and investing," said John Davidson, president and chief executive of PartnerRe Asset Management, which has $6 billion in assets. "So we need to see periods of time in which jobless claims remain below 400,000 in a more significant way."

In other economic news, factory orders fell 0.8% in August after a revised 2% gain in July. That was close to estimates of a 0.5% decline.

The 10-year Treasury note was pared losses, down 18/32 after losing more than 30/32 earlier in the session. Its yield rose to 4% after Dallas Fed President Robert McTeer said stronger economic growth this year probably wouldn't change the central bank's accommodative monetary policy anytime soon.

"I think there's enough slack in the economy ... for interest rates to be on the historically low side for the foreseeable future," McTeer said in Houston, according to

Reuters

. "I don't see any real need to start fighting inflation." He predicted growth would top 4% in the just-completed third quarter and be close to that for all of 2003.

The comments came on Wednesday, a day when stocks posted their strongest gain since June. The Dow jumped 194 points, or 2.1%, to 9469.20, while the Nasdaq gained 45 points, or 2.5%, to 1832.25.

Volume amounted to almost 1.3 billion shares at the New York Stock Exchange, while 1.6 billion shares traded hands at the Nasdaq. Advancers were ahead of decliners by a margin of 3-to-2 in both bourses.

Semiconductor shares were stealing the spotlight after Goldman Sachs practically doubled its estimate for spending on chip equipment to a 30% growth in 2004. The Philadelphia Semiconductor Index rose 2.7%.

Texas Instruments

(TXN) - Get Report

rose 16 cents, or 0.7%, to $23.41.

Advanced Micro Devices

(AMD) - Get Report

also lent the sector a hand after it was upgraded at J.P. Morgan to neutral from underweight on the basis of strong demand in Asia for flash memory chips used in wireless phones. The stock gained 55 cents, or 4.9%, to $11.72.

Oracle

(ORCL) - Get Report

fell 29 cents, or 2.5%, to $11.40 following a story on

USA Today

that the U.S. Department of Justice could try to block its $7.3 billion hostile bid for

PeopleSoft

(PSFT)

. PeopleSoft fell fractionally to $18.92.

In earnings news,

UTStarcom

(UTSI) - Get Report

jumped $2.44, or 7.7%, to $34.35 after the telephone-equipment maker forecast stronger-than-expected third-quarter earnings and revenue.

In analyst action, Merrill Lynch issued a scathing indictment of

Sun Microsystems

(SUNW) - Get Report

, warning that the workstation giant must cut costs and "accept being a niche company in mission-critical computing." Shares fell 4 cents, or 1.4%, to $3.21.

Gilead Sciences

(GILD) - Get Report

had its estimates raised at Merrill Lynch on expectations that Viread, the company's HIV treatment, will become standard care for patients. Gilead climbed $2.04, or 3.6%, to $58.82.

Nextel

(NXTL)

was upgraded to outperform from peer perform at Bear Stearns based on lower risks and strong earnings expectations. The shares rose 38 cents, or 2%, to $19.89.

Meanwhile, Banc of America Securities downgraded

Staples

(SPLS)

and

Office Depot

(ODP) - Get Report

to neutral from buy. Staples fell 50 cents, or 2.1%, to $23.90, while Office Depot shed 30 cents, or 2.1%, to $14.28.

Elsewhere,

AK Steel

(AKS) - Get Report

warned that its third-quarter loss will be wider than expected because of a bad product mix and higher raw-material costs. Shares dropped 21 cents, or 10%, to $1.89.

Ericsson

(ERICY)

rose 22 cents, or 1.5%, to $15.18 after the company extended a $1 billion credit line with banks to September 2007.

NetIQ

(NTIQ)

was sharply lower after the company warned that first-quarter revenue would trail guidance. The shares fell $1.28, or 10.3%, to $11.14.

In the pharmaceutical sector,

Forest Laboratories

(FRX)

reported disappointing clinical trials in its experimental drug for irritable bowel syndrome. Shares lost 25 cents, or 0.5%, to $49.75.

Overseas markets were mixed, with London's FTSE 100 up 1% to 4209, and Germany's Xetra DAX down 1.6% to 3276. In Asia, Japan's Nikkei closed 2.2% higher at 10,593, while Hong Kong's Hang Seng rose 2.8% to 11,546.