"The initial jobless claims indicate the labor market is still okay. This is an economy that is in a soft landing that is not going to deteriorate into a recession," said Al Goldman, chief market strategist at AG Edwards.
"The only surprise would be if they are not terrible," said Goldman of the Commerce Department's estimate that new home sales fell to their slowest pace in more than seven years during August. .
At midday, the Dow Jones Industrial Average was up 4.4 points at 13,882.5, after rising as high as 13,920.4 earlier on.
Of the Dow's 30 components, 15 were trading higher.
The S&P 500 rose 1.66 points to 1,527.08, while the Nasdaq Composite gained 5.50 points to 2,704.53.
On the New York Stock Exchange, trading volume came to 434 million, with advancing stocks ahead of decliners nearly 2 to 1, while 661 million shares were exchanged on the Nasdaq, with advancing stocks outpacing decliners by 7 to 6.
Ahead of the opening bell, the Labor Department said first-time claims for jobless benefits last week fell to their lowest level since May. .
At the same time, the Commerce Department said U.S. economic growth accelerated in the second quarter to the fastest pace in more than a year. .
These served as a prelude for data on the sale of new homes in August, with economists polled by MarketWatch looking for a drop in sales to 825,000, down from 870,000 the previous month.
Sales actually came in lower at an annualized, seasonally adjusted rate of 795,000 units, down 8.3%. This signaled persisent weakness in the nation's housing market.
Not surprisingly, KB Home came in for scrutiny, both for the third-quarter loss it reported as well as the soft state of the housing market. The company's shares fell 0.3%.
Meanwhile, shares of Rite Aid Corp. lost more than 5% in the wake of the drugstore retailer's wider second-quarter loss and its scaled-back financial forecast.
Also lower, shares of Starbucks Corp. fell 2.7%. Banc of America cut its rating on the coffee-shop operator to sell. .
An upside standout was Sallie Mae , shares of which climbed 7.7% following news the group seeking to buy the student lender is trying to renegotiate terms of the deal.
In energy trading, crude-oil futures extended prior-session gains on renewed concerns that tropical storms might spell damage for oil installations in the Gulf of Mexico. Crude for November delivery rose $1.30 cents, or 1.6%, to $81.60 a barrel on the New York Mercantile Exchange.
Gold futures edged higher, playing off a fresh decline in the dollar and the gain in crude, but came off earlier highs, lately trading up $2.20 at $737.7 an ounce. .
The dollar, which slipped to a new all-time low of $1.4166 against the euro earlier Thursday, edged higher against the Japanese yen. .
Longer-dated Treasury prices were higher, sending yields lower, after the home sales data proved worse than expected. The benchmark 10-year note climbed 6/32 to 101 6/32, its yield falling to 4.60%.
European shares were higher across the board, with the French CAC 40 index adding 0.5% to 5,702.52. Overnight, shares rallied in Hong Kong and Tokyo.
By Kate Gibson