NEW YORK – A small drop in unemployment claims and a higher profit forecast by FedEx Corp. helped push stocks to two-year highs Thursday.

The Labor Department said first-time claims for unemployment benefits fell last week to 420,000, the third drop in four weeks. The four-week average of claims also slid for the sixth straight week, reaching the lowest level since July 2008. That was before Lehman Brothers collapsed and markets seized up at the height of the financial crisis.

Separately, the Commerce Department said housing starts rose slightly last month, reversing a two-month decline.

Card companies fell sharply after the Federal Reserve proposed as 12-cent cap on the fees that merchants pay every time a customer uses a debit card. Merchants now pay a fee that ranges between 1 to 2 percent of each transaction.

The proposal could cut revenues for major banks and card networks like Visa Inc. and MasterCard Inc. Visa fell 12.7 percent to $67.19. MasterCard fell 10.3 percent to $223.49.

FedEx Corp. rose 1.9 percent to $94.22 after the company raised its earnings predictions for next year because businesses and consumers are shipping more packages. Traders took that as a sign the economy is improving.

The Dow Jones industrial average rose 41.78, or 0.4 percent, to 11,499.25. The broader Standard & Poor’s 500 index rose 7.64, or 0.6 percent, to 1,242.87. The Nasdaq composite rose 20.09, or 0.8, to 2,637.31.

Gains came across the market. All 10 company groups in the Standard and Poor’s 500 index rose.

Alcoa Inc. was the biggest gainer of the 30 stocks that make up the Dow index, rising 3.5 percent to $14.45. American Express Co. fell the most. The company lost 3.4 percent to $44.57.

Stocks have had a strong December. The Dow index has gained 4.5 over the last month. The S&P 500 has risen 5.3 percent.

A bill to extend Bush-era tax cuts along with unemployment benefits was postponed by the House of Representatives Thursday afternoon. The Senate passed the bill Wednesday. The tax package, a compromise between the White House and Senate Republicans, is expected to boost economic growth next year but also widen the budget deficit.

House Democratic leaders say they’ll pass the bill, but only after first voting whether to raise the proposed rate for the estate tax.

The yield on the 10-year Treasury fell to 3.42 percent from 3.53 percent the day before. Investors have been selling Treasurys as their outlook on the economy improves, sending yields on the bonds higher. The 10-year yield traded as low as 2.49 percent as recently as Nov. 4.

The dollar fell 0.2 percent against an index of six heavily traded currencies. Gold fell 1.1 percent.

Two stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume came to 4.4 billion shares.

NEW YORK (Reuters) – Stocks fell in a choppy session on Tuesday but showed resilience in the face of Europe’s debt crisis, recovering some of their losses on more encouraging signs from the U.S. economy.

The euro zone’s troubles showed no signs of abating as news that Portugal could be downgraded reignited selling in a high-volume flurry at the close.

Earlier, the S&P 500 had erased much of a 1 percent loss after improved consumer confidence and manufacturing data.

With Europe engaged in ad hoc crisis management for much of the year, investors are torn between that and signs of U.S. economic strength and below-average equity valuations.

“You do have a bit of a tug of war between those investors who see the environment as positive for equities over the intermediate to long-term (and) traders who are more concerned about the short-term impact of European debt concerns,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

Consumer discretionary stocks were among the better performers after the Conference Board reported U.S. consumer confidence rose to its highest level in five months. Retailer Gap Inc (GPS.N) rose 3.1 percent to $21.36, while Tiffany & Co (TIF.N) added 2.4 percent to

$62.10.

Improved consumer sentiment as well as stronger U.S. Midwest business activity are the latest in a series of reports that have made investors more optimistic before Friday’s November unemployment report and as the holiday spending season gets under way.

“I think we’ll see a rally into year-end,” said Ghriskey, who is expecting the S&P 500 to rise to 1,225 by year-end.

In another tailwind for stocks, U.S. President Barack Obama said he would attempt to negotiate a deal with Republicans on tax policy in the coming days, potentially opening the way for an extension to breaks on capital gains and dividend taxes.

The Dow Jones industrial average (.DJI) dropped 46.47 points, or 0.42 percent, to 11,006.02. The Standard & Poor’s 500 Index (.SPX) fell 7.21 points, or 0.61 percent, to 1,180.55. The Nasdaq Composite Index (.IXIC) lost 26.99 points, or 1.07 percent, to 2,498.23.

Global investors increased their exposure to equities in November despite weaknesses on many bourses, while U.S. and British fund managers stepped away from crisis-hit euro-zone bonds, a Reuters asset allocation poll found.

However, reflecting investors’ fear over short-term uncertainty, the CBOE Volatility Index, or VIX (.VIX), rose 9.3 percent to 23.54.

Investors pushed the euro lower and spreads on bonds of peripheral member states to new highs amid concerns they may ultimately be forced to default.

Amid the economic reports, the S&P/Case-Shiller home prices data was a fly in the ointment. Monthly prices fell more than expected in September and prices from a year earlier rose more slowly than forecast.

But in a sign that investors may have grown too bearish on the sector, the Dow Jones U.S. home construction index (.DJUSHB) edged up 0.9 percent after closing Monday at its lowest since July 2009. The index is down 13.2 percent this year.

Google Inc (GOOG.O) weighed on the Nasdaq index following media reports that it is close to a deal to buy local advertising website Groupon Inc in what could be the Internet company’s biggest acquisition to date. Google shares fell 4.5 percent to $555.71.

Declining stocks beat advancers by a ratio of almost 2 to 1 on the New York Stock Exchange, and by just over 2 to 1 on the Nasdaq.

About 8.72 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, above the year-to-date average of about 8.48 billion.

(Reporting by Edward Krudy; Editing by Jan Paschal)

NEW YORK – Google’s upbeat earnings report sent technology stocks higher Friday, while the rest of the stock market lagged on concerns about banks’ foreclosure problems.

The tech-focused Nasdaq composite index rose more than 1 percent with a boost from Google Inc.’s 11 percent gain. While all three major market indexes rose for the week, the Nasdaq’s 2.7 percent jump more than doubled the performance of other measures.

Stocks across the board initially rose after Federal Reserve Chairman Ben Bernanke reiterated that the central bank is ready to do more to stimulate the economy. Bernanke’s comments were the latest confirmation the central bank is about to step up its purchase of Treasury bonds to spark growth.

But that burst of optimism couldn’t fully overcome worries about how banks like Bank of America Corp. and JPMorgan Chase & Co. handled the foreclosure process on mortgages. Both banks, along with General Electric Co., were the primary culprits in sending the Dow Jones industrial average down more than 30 points.

“The market is not going to continue to rally if financials accelerate to the downside,” said Maier Tarlow, a managing director at Raven Securities. “It’s a major roadblock.”

A small drop in the University of Michigan/Reuters consumer sentiment survey countered reports of growth in retail sales and manufacturing activity in New York.

Economists polled by Thomson Reuters expected the preliminary reading on October consumer sentiment to rise slightly. Retail sales climbed in September by more than economists had forecast. Manufacturing activity in New York surged in October and pointed to continued expansion in the coming months.

The Dow fell 31.79, or 0.3 percent, to 11,062.78. It had been up as much as 47 points shortly after the opening bell. It was up 0.5 percent for the week.

The Standard & Poor’s 500 index rose 2.38, or 0.2 percent, to 1,176.19. It was up 1 percent for the week.

The Nasdaq jumped 33.39, or 1.4 percent, to 2,468.77. It was up 2.8 percent for the week. Tech stocks got a lift from Google’s 32 percent jump in third-quarter earnings. The Internet search company’s results were well above analyst’s estimates. The company reported big gains in advertising revenue.

The Fed has hinted in recent weeks it would resume a program it ran during the recession to stimulate the economy. Bernanke’s comments Friday were the most definitive proclamation yet that the Fed would act. However, he cautioned the central bank is still trying to figure out how big the bond purchase program should be.

Anthony Chan, chief economist at J.P.Morgan Private Wealth Management, said Bernanke successfully walked a fine line Friday between maintaining market enthusiasm over the expected program and avoiding upsetting other Fed board members who might have differing opinions.

The program would likely be aimed at driving interest rates down from already low levels in an effort to spark borrowing and spending by companies and consumers.

More spending, in turn, could lift corporate sales and lead to more jobs. High unemployment remains one of the biggest drags on the economy.

Stocks have been rallying in recent weeks in anticipation the Fed would announce a firm plan at its next meeting, which ends Nov. 3. Lower rates have helped stocks because it drives down yields on Treasury bonds. That makes stocks and other riskier investments like commodities more attractive.

“The Federal Reserve has basically put a floor in the market,” said Kevin Mahn, chief investment officer at Hennion & Walsh Asset Management.

Any action by the Fed could have the dual effect of increasing inflation. Bernanke said inflation still remains too low by historical standards. If rates drop and borrowing and spending pick up, prices would rise.

The government said Friday that the consumer price index, a measure of inflation at the retail level, rose just 0.1 percent last month. Prices were flat excluding volatile food and energy costs.

Bond prices were trading in a tight range after Bernanke’s speech. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.57 percent from 2.51 percent late Thursday. Its yield is helped to set interest rates on mortgages and other consumer loans.

Bank of America shares fell 62 cents, or 4.92 percent, to $11.98, while JPMorgan Chase dropped $1.57, or 4.1 percent, to $37.15. GE fell 86 cents, or 5 percent, to $16.30.

Google shares jumped $60.52, or 11.12 percent, to $601.45.

Consolidated volume on the New York Stock Exchange came to 5.8 billion shares, compared to 5.3 billion Thursday. Losing stocks were ahead of gainers by 3 to 2.

NEW YORK – A late push gave stock indexes moderate gains Tuesday as investors brushed off news that consumer confidence dropped to its lowest level since February.

A big jump in earnings from Walgreen Co. and another corporate acquisition gave investors enough confidence to extend a four-week rally. Stocks were mixed for much of the day but struggled higher at the finish.

With only two trading days left this month, the Dow Jones industrial average is on track for its best September since 1939 with a gain of 8.4 percent so far. It’s still up only 4.1 percent for the year.

Stocks got off to a bad start after the Conference Board said its September reading on consumer confidence fell sharply from August and came in well below forecasts. Mostly positive readings from economic data on manufacturing, home sales and jobs have helped push stocks higher this month after a dismal performance on August.

Scott Rostan, founder of Training The Street, which provides courses in financial modeling and corporate valuation, said the small move in stocks compared to the big decline in confidence was indicative of a growing schism between consumers and traders.

“There’s a big dichotomy between Main Street sentiment and Wall Street sentiment,” Rostan said. Right now, traders are more focused on sentiment and confidence among corporate executives than consumers, he said.

Drug developer Endo Pharmaceuticals Holdings said Tuesday it will buy Qualitest Pharmaceuticals for $1.2 billion. That comes a day after major companies including Unilever NV and Southwest Airlines Co. announced deals. Wal-Mart Stores Inc. said it was pursuing buying a South African company.

In other corporate news, Walgreen Co. soared 11.4 percent after the drugstore chain reported income that easily beat forecasts. Meanwhile technology stocks were being dragged down on disappointment that Research in Motion Ltd. said it would not roll out its competitor to Apple Inc.’s iPad, called the PlayBook, until the beginning of 2011.

The Dow Jones industrial average rose 46.10, or 0.4 percent, to 10,858.14. It’s up 8.4 percent so far in September, and extraordinary showing for a month that is historically a weak one for the market.

Investors are “looking beyond today’s news at broader indications a double-dip (recession) is more and more remote,” said Joe Heider, a principal at Rehmann Financial.

If the Dow can climb above 11,000 it would be a strong indication the market is ready to break out of the broad trading range it’s been stuck in since hitting its 2010 high in late April, Heider said.

The Standard & Poor’s 500 index rose 5.54, or 0.5 percent, to 1,147.70, while the Nasdaq composite index rose 9.82, or 0.4 percent, to 2,379.59.

Treasury prices rose after the weak report on consumer confidence, driving interest rates lower. The yield on the 10-year Treasury note, which is often used to set interest rates on loans, fell to 2.47 percent from 2.53 percent late Monday.

Apple shares fell $4.30 to $286.86 on heavy volume. Its price plummeted $16.77, or 5.7 percent, in the first three minutes of trading before quickly recovering most of those losses.

Endo Pharmaceuticals shares rose $2.49, or 8.1 percent, to $33.10. Research in Motion shares fell $1.45, or 3 percent, to $46.91. Walgreen rose $3.46 to $33.81.

Rising stocks outpaced falling ones two to one on the New York Stock Exchange, where consolidated volume came to 4.1 billion shares.

SINGAPORE (Reuters) – Asian stocks remained under pressure on Thursday as worries about a U.S. economic slowdown persisted, even as a spate of Chinese data pointed to only a mild cooling in that economy.

China’s annual economic growth eased to 10.3 percent in the second quarter from 11.9 percent in the first quarter, a touch weaker than expected, in response to credit curbs and the fading of fiscal stimulus.

Nevertheless, the data showed concerns about a steep slowdown in the world’s third-largest economy were overblown. Inflation at the producer and consumer level also eased in June from May, reducing the need for further policy tightening.

With no nasty surprises from China, investor concern returned to the health of world’s biggest economy after minutes of the Federal Reserve’s June meeting showed officials were more concerned with the pace of the U.S. recovery.

The MSCI index of stocks in Asia-Pacific outside Japan (.MIAPJ0000PUS) was down 0.4 percent at 0450 GMT (12:50 a.m. EDT). The index had briefly turned higher after the Chinese data.

The Aussie dollar erased the half percentage point loss against the dollar it had made after an official Chinese paper reported the economy may slow more sharply than expected in the second half of this year.

“The data has attracted much attention but at the end of the day, they were not far from market expectations. They showed the Chinese economy is slowing down but that’s what markets have been looking for,” said Hideaki Inoue, manager of foreign exchange at Mitsubishi Trust and Banking Corp.

Shanghai stocks (.SSEC) fell 0.36 percent, reversing earlier gains, after Agricultural Bank of China (601288.SS) disappointed with a lackluster Shanghai debut. Its shares rose only marginally in the first few minutes of trading.

Banks repossessed a record number of U.S. homes in the second quarter, though foreclosure filings eased slightly from earlier in the year, real estate data firm RealtyTrac said on Thursday. The root problems of job losses persist, making a sustained recovery in the housing market elusive.

Investors were waiting for corporate earnings results, including those from Google (GOOG.O) and JPMorgan Chase (JPM.N)

AUSSIE DOLLAR WHIPSAWS ON CHINA REPORTS

The Australian dollar stood at $0.8802, down 0.4 percent on the day but above the day’s low of $0.8780 hit after the Chinese newspaper report fanned fears of a sharp growth slowdown.

The Chinese Securities Journal reported prior to the government data that the economy may slow more sharply than expected in the second half of this year, which could cool demand for commodities.

The euro erased its losses to change hands at $1.2746, not far from its two-month high of $1.2778 hit on Wednesday.

The dollar was under pressure, holding near two-month lows against a basket of currencies (.DXY).

Meanwhile, S&P futures erased earlier losses and were 0.17 percent higher on the day at 1,093.00, compared to around 1,090 before the data.

(Editing by Jan Dahinten)

NEW YORK (Reuters) –
The Dow and S&P 500 were little changed on Friday as the S&P was headed for its best week so far this year and investors looked ahead to the start of earnings season.

Google Inc (GOOG.O) helped lift the Nasdaq, rising 1.6 percent to $463.68 after Beijing gave the company the green light to continue operating its China Internet search page. U.S.-listed shares of rival Baidu Inc (BIDU.O) fell 2.7 percent to $70.46.

The S&P 500 has risen 4.8 percent so far this week and could notch a fourth straight day of gains on Friday. Most of the advance has been driven by the hope that companies will post strong quarterly results. The earnings season unofficially kicks off on Monday after the closing bell when Alcoa Inc (AA.N) reports.

The aluminum company, the first Dow component to report, is expected to swing to a second-quarter profit, though falling aluminum prices have prompted analysts to cut their estimates on the stock.

Despite the week’s gains, marked by volatility and low volume, sentiment remains fragile. Many investors are concerned that the global economy could experience a double-dip recession. Those fears have driven the S&P 500 down about 12 percent from its most recent closing high in late April and down about 4 percent so far this year.

“We’ve had better-than-expected earnings for the past six months, and the big question on everyone’s mind is if that will continue,” said Tom Lydon, president of Global Investment Trends in Newport Beach, California.

“There’s been more discussion that we could see disappointing results, but the proof will be in the pudding.”

The Dow Jones industrial average (.DJI) was up 4.39 points, or 0.04 percent, at 10,143.38. The Standard & Poor’s 500 Index (.SPX) was up 1.66 points, or 0.16 percent, at 1,071.91. The Nasdaq Composite Index (.IXIC) was up 6.08 points, or 0.28 percent, at 2,181.48.

Johnson & Johnson (JNJ.N) was the biggest drag on the Dow, falling 1.3 percent to $60.56 a day after it recalled more Tylenol and other over-the-counter drugs following consumer complaints of odors. The move expands a recall started in January.

In deal news, Air Products and Chemicals Inc (APD.N) late Thursday raised its hostile bid for rival Airgas Inc (ARG.N) by 5.8 percent to $5.3 billion, but the offer remained slightly below the company’s current market value.

Air Products rose 0.9 percent to $69.41, while Airgas rose 1.3 percent to $64.67.

In economic news, U.S. wholesale sales fell unexpectedly in May for the first time in more than a year, lifting inventories to their highest level in 11 months, a government report showed on Friday.

Recent U.S. data showing slowing growth in the services and manufacturing sector, weakness in housing and a stagnating jobs market has worried investors, although most say it is too early to call a “double-dip” recession.

Equity funds worldwide suffered more than $11 billion in net outflows in the first week of July, while money market funds attracted the biggest inflows in 18 months, fund tracker EPFR Global said.

In addition to Alcoa, companies reporting next week include JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) and General Electric Co (GE.N).

The banks will be scrutinized by investors concerned about delinquencies and loan demand to gauge the sustainability of a recent improvement in credit quality.

(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)