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Updated from 4:12 p.m. EDT

Stocks didn't stray too far from their opening levels Thursday as investors worked to sort out the latest

Federal Reserve

thinking on interest rates and awaited tomorrow's report on the nation's employment situation.

The

Dow Jones Industrial Average

added 3.62 points, or 0.03%, to 10,553.49, and the

S&P 500

was higher by 2.07 points, or 0.17%, at 1204. The

Nasdaq Composite

was the best performer, up 10 points, or 0.48%, to 2098. The 10-year Treasury was down 1/32 in price to yield 3.89%, while the dollar fell against the yen and euro.

Trading volume on the

New York Stock Exchange

was 1.78 billion shares, with advancers beating decliners by a 10-to-7 margin. Volume on the Nasdaq was 1.74 billion shares, with advancers outpacing decliners 8 to 7.

"We are encouraged and somewhat surprised by the resiliency of this rally," said John Hughes, equity strategist with Shields & Co. "When you're overbought, you typically get some consolidation. The market has hung on and continued to advance. Even though today was quiet, it managed to put something together. The Nasdaq has definitely been the leadership. Hopefully we won't have any negative surprises tomorrow."

The action in stock, bond and currency markets Thursday ran counter to big moves yesterday, when the Dow rose 82 points and the 10-year note's yield fell from 4% to 3.89%. Bulls of all stripes celebrated Wednesday after Dallas Fed President Richard Fisher implied that the FOMC is nearing the end of its rate-tightening campaign, describing this month's meeting as the "ninth inning" of the cycle.

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Oil backed off yesterday's gain, closing the session down 97 cents to $53.63 a barrel in Nymex floor trading. The July contract remains up more than 11% over seven sessions. Oil finished lower after the Department of Energy said that crude inventories rose 1.4 million barrels for the week ended May 27. Gas stocks added 1.3 million barrels, while distillates were up 700,000 barrels.

"Today you've digested yesterday's action, and with oil down the market has moved up," says Jay Suskind, head of institutional trading with Ryan Beck & Co. "People want to play it close to home ahead of economic data tomorrow. If the data come in showing good job growth without wage inflation, I think the market will continue to rally. It'll be the first Friday of the summer, so you may only have an uneventful day on light volume."

On Friday, the Labor Department will release the eagerly awaited employment report for May. Economists predict 180,000 jobs were created last month, down from April's unexpected jump of 274,000 new jobs.

"The market is doing decent, with technology leading the way," says Peter Cardillo, chief market analyst with SW Bach & Co. "I think the market is on hold until the nonfarm payroll data tomorrow."

The Labor Department revised first-quarter productivity to 2.9% from the previously reported 2.6% annual rate of growth. Economists had expected the rate to rise to 3%. Unit labor costs, which were expected to dip slightly, rose to 3.3% from 2.2%. Separately, the Labor Department also said jobless claims for the week ended May 28 rose 25,000 to 350,000, much greater than expectations.

"The productivity data suggest that more Fed rate hikes are likely," says Drew Matus, senior economist with Lehman Brothers. "The problem is the increase in unit labor costs, which point to wage-push inflation developing."

Ian Shepherdson, chief economist with High Frequency Economics, says the jobless claim number "looks seriously disappointing at first sight, but the Labor Department has apparently advised that a significant portion of the increase is due to auto sector layoffs. These are not the usual midyear retooling shutdowns, which come in July; instead they are a reflection of the ongoing troubles at

Ford

(F) - Get Ford Motor Company Report

and

General Motors

(GM) - Get General Motors Company Report

."

Also, the Commerce Department said April factory orders were up 0.9%, compared with economists' forecast of a 1.1% increase. Orders in March were revised up to a 0.7% gain from 0.1% previously.

Stronger sectors included energy, technology, homebuilding and semiconductors, with the Philadelphia semiconductor sector index closing up 1.8%. Financials, biotechs, drugs and materials were among the weaker areas.

Two acquisitions in the technology arena were among the top corporate stories Thursday.

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

agreed to acquire

Storage Technology

(STK) - Get Columbia Seligman Premium Technology Growth Fund Inc. Report

for $4.1 billion in cash, or $37 a share, an 18% premium over Wednesday's close of $31.23. Sun expects the deal to add to its earnings before items in the first year. Sun lost 11 cents, or 2.8%, to $3.79. StorageTek shares jumped $5.13, or 16.4%, to finish at $36.36.

eBay

(EBAY) - Get eBay Inc. Report

was lower after saying last night it will spend $620 million in cash for

Shopping.com

(SHOP) - Get Shopify, Inc. Class A Report

. The $21-a-share takeout price is 20% above Shopping.com's closing price and comes out to roughly 4.7 times its estimated 2005 sales. eBay fell 6 cents, or 0.1%, to $39.05, while Shopping.com surged $3.33, or 19.1%, to $20.77.

Elsewhere,

Biogen Idec

(BIIB) - Get Biogen Inc. Report

and

Elan

(ELN)

were both lower after the

Boston Globe

reported that a fourth multiple-sclerosis patient might have contracted a rare brain disease while taking their Tysabri drug. Tysabri was pulled from the market in February after doctors discovered two patients with the illness, progressive multifocal leukoencephalopathy, or PML. Biogen fell $1.70, or 4.3%, to $38.07, while Elan dropped $1.14, or 14.3%, to $6.85.

Thursday was retail sales day in the U.S., when chain stores report results for May. Among companies reporting better-than-expected results were

Limited Brands

(LTD)

,

bebe Stores

(BEBE)

and

Chico's

(CHS) - Get Chico's FAS, Inc. Report

. Meanwhile,

Pier 1 Imports

(PIR) - Get n.a. Report

and

Goody's Family Clothing

(GDYS)

both reported weak months and lowered earnings guidance.

Wet Seal

(WTSLA)

was one of the best retail performers in May, reporting a same-store sales increase of 56.9%. The clothing retailer said that total sales in the quarter rose 21.1% to $40 million. Shares added 70 cents, or 16.7%, to $4.90.

Network-gear maker

Ciena

(CIEN) - Get Ciena Corporation Report

posted a narrower loss in its second quarter. The company lost $74.8 million, or 13 cents a share, in the quarter, compared with $76.2 million, or 16 cents a share, a year ago. Shares dipped 4 cents, or 1.6%, to $2.41.

CVS

(CVS) - Get CVS Health Corporation Report

said it now expects earnings of $2.70 to $2.75 a share for the year, up from previous estimates of $2.66 to $2.72 a share. For the second quarter, the drug retailer expects EPS of 61 cents to 63 cents, up from its previous estimates of 59 cents to 61 cents. Analysts are forecasting earnings of 61 cents a share for the quarter and $2.71 for the full year, according to Thomson First Call. Shares of CVS were higher by $2.17, or 3.9%, to close at $57.25.

Wall Street's recent travails got one of their first formal airings Wednesday night when a

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. Report

executive called the bank's second-quarter trading results the "worst in some time," with revenue from the division coming in below the $842 million posted in last year's sleepy third quarter. J.P. Morgan had trading revenue of $2.2 billion in the first quarter.

Corning

(GLW) - Get Corning Inc Report

late Wednesday announced a public offering of 20 million shares for proceeds of some $325 million from its existing $5 billion shelf registration. Corning also reaffirmed its second-quarter forecast. Shares were lower by 25 cents, or 1.5%, to close at $15.99.

Shares of

Apple

(AAPL) - Get Apple Inc. Report

dipped 0.6% after Goldman Sachs said it believes sequential growth in iPod sales will be lower than what investors are now accustomed. Apple was down 26 cents to $40.04.

In other brokerage moves, Bear Stearns downgraded movie theater companies

Regal Entertainment

(RGC)

and

Carmike Cinemas

(CKEC)

to underperform from peer perform, citing lower attendance due to declining costs of DVDs and home entertainment. The firm gave a $16 stock price target for Regal and a $28 target for Carmike. Regal fell $1.01, or 5%, to $19. Carmike was down $1.47, or 4.4%, to finish at $31.88.

Merrill Lynch pressured investment banks Thursday, trimming its second-quarter earnings outlook for

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. Report

to $1.82 a share from $2.02 a share. The brokerage also cut its second-quarter profit estimate for

Morgan Stanley

(MWD)

to $1.12 a share from $1.18 a share. Merrill cited a slowdown in trading volume as issuance failed to improve for both companies. Goldman lost 97 cents, or 1%, to $97.67, while Morgan Stanley fell 79 cents, or 1.6%, to $49.28.

Overseas markets were mostly lower, with London's FTSE 100 down 0.1% to 5005 and Germany's Xetra DAX up 0.1% at 4532. In Asia, Japan's Nikkei fell 0.4% overnight to 11,280, while Hong Kong's Hang Seng shed 0.4% to 13,815.

To view Gregg Greenberg's video take on today's market, click here

.