Earnings gains drive stocks higher on Wall Street

NEW YORK The stock market returned to record levels as gains at major U.S. companies drove stocks higher on Wall Street Thursday.

A drop in claims for unemployment benefits also encouraged investors. The number of Americans applying for benefits fell 24,000 last week to 334,000, a sign that steady job gains should continue.

Morgan Stanley was among the standouts among companies reporting second-quarter results, rising $1.19, or 4.5 percent, to $27.72. The New York bank reported sharply higher earnings driven by investment banking gains. IBM rose $5, or 2.6 percent, to $199.50 after its profit beat analysts' forecasts as software sales grew.

The Dow Jones industrial average rose 115 points, or 0.7 percent, to 15,585 as of 10:55 a.m. ET. The Standard & Poor's 500 index climbed 12 points, or 0.7 percent, to 1,692.

The Nasdaq rose 11 points, or 0.3 percent, to 3,620. The index was held back by weak earnings reports from several major technology companies.

Investors will also be watching for comments from Federal Reserve chairman Ben Bernanke, who is delivering what could be his final semiannual economic report to Congress. Bernanke is appearing before the Senate Banking Committee and repeating testimony he gave to the House Financial Services Committee Wednesday.

Bernanke gave stocks a lift on Wednesday when he said that there was no "preset course" for ending the Fed's $85 billion-a-month bond-buying program and that any change would depend on how well the economy is doing. Investors have worried that the central bank might reduce its stimulus before the economy was strong enough to withstand it.

eBay fell $3.80, or 6.6 percent, to $53.58 after its CEO John Donahoe said late Wednesday that economic weakness in Europe and Korea will "continue to be a challenge" in the second half of the year.

Intel fell 83 cents, or 3.5 percent, to $23.32 after the world's largest maker of computer chips predicted flat sales amid a decline in PC sales. The company's earnings and revenue fell in the second quarter.

The stock market has resumed its upward march in July after pulling back in June. The S&P 500 has gained 4.5 percent this month and is up 18.7 percent for the year.

Stocks may struggle to make further gains from here as the economic recovery catches up with the stock market, said JJ Kinahan, chief derivatives strategist at TD Ameritrade. Economists polled by FactSet expect U.S. growth fell to 0.5 percent in the second quarter after climbing at a 1.8 percent annual pace in the first three months of the year.

"We all know that the stock market reflects the future, but I don't think that the underlying economy has as much confidence as the market does," said Kinahan. "We could go sideways for much of the rest of the year."

In government bond trading, the yield on the 10-year note edged up to 2.53 percent from 2.49 percent late Wednesday.

In commodities trading, the price of oil rose $1.31, or 1.2 percent, to $107.78 a barrel. The price of gold gained $8.10, or 0.7 percent, to $1,285.90 an ounce.

The dollar rose against the euro and the Japanese yen.

Among other stocks making big moves, UnitedHealth Group, the nation's largest health insurer, rose $3.72, or 5.6 percent, to $69.92 after reporting earnings that beat analysts' estimates. The company's enrollment increased by 3 million people. UnitedHealth is the first major health insurer to report earnings every quarter and is seen as a bellwether for other insurers.