Higher-than-expected jobless claims, sharp weakness in the dollar, and warnings from Albertson's ( ABS) and Roadway ( ROAD) weighed on a technically overextended market Thursday. But demand for shares remained keen and major averages finished in positive territory.

After trading as low as 8969.24, the Dow Jones Industrial Average recovered to finish up 2.32 points at 9041.30. As has been the case for some time now, broader stock gauges fared better than the Dow; the S&P 500 rose 0.4% to 990.14 while the Nasdaq Composite gained 0.7% to 1646.01.

Breadth improved as the day progressed, with advancing stocks besting declining issues by 4 to 3 in New York Stock Exchange trading and 19 to 12 in over-the-counter activity. At 1.7 billion and 2.4 billion shares respectively, volume remained robust although some said the activity dwindled in the afternoon, even as the averages drifted higher.

"Put yourself in the shoes of an aggressive hedge fund or mutual fund trader," said Michael Driscoll, director of listed trading at Bear Stearns. "You sell some stuff early and, maybe super fast guys are short early, then buy later. Then everyone sits on their hands."

Friday's employment report "has the potential to short-circuit the rally," and "if you caught any of this move, you want to nail down some profits," ahead of that Driscoll said. He suggested that's what occurred in the energy and utility stocks he's focused on. The Dow Jones Utility Average fell 1.3% while the Amex Oil Index dipped 0.1%.

But by and large, the action was tilted toward the positive yet again.

It's All Good, Continued

Helping the S&P overcome steep declines in Albertson's and Roadway was strength in Best Buy ( BBY), which lifted earning estimates. Also, other retailers rallied after posting better-than-expected, or not-as-bad-as-feared, monthly same-store sales results, notably Sears ( S) and Ann Taylor ( ANN). The S&P Retail Index rose 1.2%.

Pharmaceuticals were also on the rise after sell-side analysts at Goldman Sachs and UBS Warburg issued positive comments on the group, citing the potential for Medicare reform favorable to the industry. The Senate is expected to soon announce plans for a $400 billion prescription drug benefit to the program, Dow Jones reported. The Amex Pharmaceutical Index rose 1.6%.

More dramatic action occurred in biotech, which continued its recent momentum with a host of names sporting huge percentage gains. The Amex Biotech Index jumped 5.7% amid a squeeze on heavily shorted names and a torrent of rumors about potential mergers in the sector, as my San Francisco office mate Adam Feuerstein observed in RealMoney.com's Columnist Conversation.

The semiconductor sector was relatively subdued ahead of Intel's ( INTC) midquarter update, but Applied Micro Circuits ( AMCC) leapt 23% after its CEO reiterated earnings guidance and cited strengthened order activity since April.

Conversely, Xilinx ( XLNX) fell 1% -- ending about $1 off its session low -- after failing to raise earnings guidance, as its rival Altera ( ALTR) had Wednesday. The Philadelphia Stock Exchange Semiconductor Index rose 0.3% to 395.02 after trading as low as 382.79.

After the close of trading, Intel narrowed the range of its expected revenues for the quarter to between $6.6 billion and $6.8 billion vs. between $6.4 billion and $7 billion previously. After rising 2.2% to $21.85 in New York trading, Intel shares were down in after-hours trading although the company seemingly remains on track to meet analysts' consensus revenue estimates of $6.66 billion.

Elsewhere, there were some big gains in open-source software makers such as VA Software ( LNUX) and Red Hat ( RHAT) after Bloomberg reported on an internal email from Microsoft ( MSFT) CEO Steve Ballmer, who wrote that Linux "presents a competitive challenge for us and our entire industry."

Shares of Microsoft fell 3.2%, in part because of Ballmer's comments and in part because Banc of America Securities strategist Thomas McManus removed the software giant from his "fresh money focus list." McManus cited only Microsoft's 11% decline since it was added to the list on January 10, with Thursday being yet another example of the stock's relative weakness.

Several observers, including one self-proclaimed "bitter" hedge fund manager, observed Ballmer's internal state-of-the-company email came about a week after he sold 49.4 million shares of Microsoft. Ballmer called the sale a "personal financial matter" having nothing to do with the company's prospects, about which he "remain ed excited."

To be sure, Ballmer still owns more than 421 million shares of Mister Softee and it's not unusual for managers, especially at Microsoft, to play up competitive threats in order to inspire employees to work harder. Nevertheless, the timing of the sale and the memo left many market participants piqued, which isn't surprising given the heightened scrutiny of corporate executives.

Mini Me

Faithful readers might note tonight's column is more heavily slanted toward microeconomic company news than the usual macroeconomic fare. That's because nothing on the macro front explains what's happening right now -- other than the combination of aggressive monetary and fiscal stimuli, which is no small matter.

On the macro front Thursday, meanwhile, weekly jobless claims were a higher-than-expected 442,000 while April factor orders fell a larger-than-expected 2.9%, and March's gain was revised down slightly. The European Central Bank cut its target short-term rate by 50 basis points to 2%, spurring strength in the euro, which was trading at $1.1838 in late New York trading vs. $1.1664 the prior day.

The euro's gains were attributed to optimism that lower rates will spur faster growth in the eurozone, and the expectation the Fed will again widen the yield differential between the currencies when it meets later this month.

The price of the benchmark 10-year Treasury fell 13/32 to 102 12/32, its yield rising to 3.34%. Treasuries reportedly reacted more to the largest-ever muni bond sale -- a $10 billion offering by Illinois -- than any weakness in the greenback.

Gold, however, benefited from the dollar's downturn; the yellow metal rose 1.4% to $368.80 per ounce.

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

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