Stocks edge higher as unemployment claims drop

CHRISTINA REXRODE AP Business Writer Published:

NEW YORK (AP) -- Stocks edged higher on Wall Street Thursday on signs of strength in the U.S. job market, but continuing uncertainty about Greece's debt problems kept the gains in check.

The Dow Jones industrial average was up 53 points to 12,834 around 11:15 a.m., erasing a pre-market decline caused by fears that Greece's latest bailout package could fall apart.

The broader Standard & Poor's 500 was up 5 at 1,348 and the Nasdaq composite was up 11 points at 2,926.

The Labor Department said weekly applications for unemployment benefits dropped for the fourth time in five weeks to the lowest point since March 2008. That was before the financial crisis imploded and when the jobless rate was just 5.1 percent, far below the current rate of 8.3 percent.

The stronger reading on the jobs market led traders to sell Treasury bonds, a sign that they're more comfortable plowing money into riskier assets like stocks. That pushed bond prices lower and lifted the yield on the 10-year Treasury note to 1.97 percent from 1.93 percent.

The market has been rising slowly but steadily for most of the year, as investors shake off some of last year's fears about a second recession and the S&P's August downgrade of U.S. debt proved to have minimal real effect.

John Burke, president of Burke Financial Strategies in New Jersey, thinks some of the calm has been caused by the Federal Reserve flooding the market with cheap money. The Fed has promised to keep interest rates near zero for the next several years, which could prop up the economy rather than let it work out problems with its growing budget deficit.

"They're pushing the problem off," Burke said. "We're fine today, we'll avoid (another) recession, but what's that going to do to us when the term is up?"

European markets didn't do as well. As it has for weeks, deal-making on bailing out Greece dawdled on without any real clarity. Greece is trying to negotiate with its lenders, including the 16 other countries that use the euro, for breaks on some of its loans coming due next month. If it doesn't get the bailout, it will spiral into bankruptcy and could be forced to leave the euro.

Stock indexes in France, the U.K., Germany and Spain slid on worries over whether Greece will secure the bailout, though the ATHEX index in Greece climbed 1.1 percent.

The euro fell slightly to $1.30, a sign of waning confidence in Europe. The euro had been rising more or less steadily since mid-January, but stalled out late last week around $1.33.

Borrowing rates rose for Italy and Spain, a sign that investors are worried that the two countries would be dragged back into a crisis that had shown signs of easing. Portugal, another troubled euro zone country, reported 14 percent unemployment, the highest on record.

Some of the lenders, including richer euro zone countries like Germany, have complained that Greece hasn't lived up to previous commitments to cut spending, a hard task in a country where citizens have grown used to extravagant government spending.

Gas prices could be a lurking problem, rising as Iran threatens to crimp its exports. The average price for a gallon of gasoline is around $3.52, up 23 percent since Jan. 1. That's the highest ever for this time of year, and experts say it could climb to $4.25 a gallon by late April.

In other stocks making big moves:

-- General Motors rose 5 percent, boosted by news that it had earned its highest profit ever in 2011, just two years after the auto giant teetered near collapse and had to be rescued by taxpayer money. The profit masked some troubling statistics, including losses in Europe and South America, but investors didn't seem to mind.

-- Jam maker J.M. Smucker plummeted 6 percent after the company missed analysts' estimates for net income and revenue.

--Molson Coors rose 4 percent after the beer maker beat analysts' expectations, helped by higher sales of Modelo beer in Japan and Coors Light in Latin America and China.