Stocks got back on the winning track in this holiday-shortened week. The advance was modest but impressive, given stocks overcame another round of negative economic data, including Thursday's unemployment report.

For the week, the

Dow Jones Industrial Average

rose 0.9%, the

S&P 500

gained 1% and the

Nasdaq Composite

climbed 2.4%.

Trading activity was heavier than expected given the holiday atmosphere; U.S. financial markets closed early Thursday and are shuttered Friday in observance of the July 4 holiday. Volume was notably higher on the market's up days vs. down, continuing a bullish trend evident since the mid-March lows.

As stocks rose, the Treasury market's rally continued to come undone. For the week, the yield on the benchmark 10-year note rose 11 basis points, ending Thursday at 3.65%. The 10-year's yield moves in the opposite direction of its price, which fell sharply this week, including a 30/32 drop to 99/25 on Thursday.

One of the week's major trends -- resilience to disappointing economic news -- revealed itself Monday when shares fell only modestly despite a weaker-than-expected report on the Chicago Purchasing Managers Index. As reported

here, the S&P 500's ability to stay above 973 was a technical victory, one that would prove crucial as the week progressed.

On Tuesday, the S&P fell as low as 962 intraday but rallied back strongly in the afternoon, finishing with a solid gain. Other averages followed similar patterns, rebounding from early losses to close higher despite more lackluster economic data, most notably the Institute for Supply Management's (ISM) national manufacturing survey. In addition, the government reported May construction spending unexpectedly fell 1.7%, a decline that was largely dismissed as being caused by inclement weather. June auto sales, particularly for


(F) - Get Report

, were weak as well.

Tuesday's intraday recovery was sparked, in large part, by U.S. District Judge Milton Pollack's decision to dismiss a class-action lawsuit against

Merrill Lynch


. In sum, the judge said investors who felt burned by Merrill's tainted research during the bubble were looking for a scapegoat for their own greed. The decision was widely embraced by Wall Street, which has feared a potential onslaught of such class-action suits.

Wall Street's joy with Pollack's decision carried over into Wednesday's session, which saw the Nasdaq leap to its highest close in over a year. The Dow and S&P also rallied sharply, buoyed in part by financial stocks in the wake of the dismissal. Also giving shares a boost were


(MSFT) - Get Report



(WMT) - Get Report

, each the beneficiary of a Merrill Lynch upgrade.

The rally petered out Thursday, although traders' desire to own stocks and proclivity to ignore bad news was on display again. In an aborted session, the Dow fell 0.8% to 9070.21, the S&P declined 0.8% to 985.70 and the Comp slid 0.9% to 1663.45. The declines were fairly tame considering the unemployment rate rose to 6.4% in June, up from 6.1% in May and its highest level in nine years. Nonfarm payrolls fell by 30,000 last month, as opposed to expectations that it would remain unchanged.

"The peak in the jobless rate could be months or quarters away, and we fear that even as it peaks, it will be extremely slow to come down," warned David Rosenberg, chief North American economist at Merrill Lynch.

But the consensus view was more upbeat. Jobs are a lagging indicator, the optimists noted. While a higher unemployment rate is certainly not good news, especially for consumer confidence, the report did little to shake traders' yearning for shares. Stocks rebounded from an early dip, aided by a stronger-than-expected report from the ISM's nonmanufacturing index, which rose to 60.6 in June vs. 54.5 in May, and expectations for a more modest rise to 55. Clearly the ISM services index isn't as significant as the employment number, but the prevailing trend of seizing on positive data and ignoring negative developments emerged again.

In fact, what really seemed to unsettle the market Thursday was not the jobs data but an erroneous trade. Apparently, a trader put in an order to sell 2,000 S&P 500 futures contracts, rather than 200, as requested by his or her client.

"The most significant thing about the action

Thursday was how fast the buyers were to forgive the weak employment data this morning," observed

contributor James DePorre. "The initial selloff was pounced on as a buying opportunity, and the ramifications of what the report meant was shrugged off."

While that was a good summary of Thursday's action, it actually pretty much reflected the entire week as well.

Tune-In TaskMaster

I'll be back on WABC radio's Batchelor & Alexander show Thursday night, around 9:30 p.m. PDT/12:35 a.m. EDT (i.e., Friday morning for East Coasters.)

The show is nationally syndicated, so check for local listings or Webcast options.

TaskMaster Tuning Out

Starting Friday, I'll be on vacation until July 14. Best wishes to all for a safe, happy and healthy holiday weekend.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.