U.S. Stocks Advance In Heavy Volume

NEW YORK (MarketWatch) -- U.S. stocks gained Thursday, bolstered by bright profit reports from the likes of Nokia Corp., Starbucks Corp., and Dow component Walt Disney Co., while a $4.4 billion deal helped offset worries about the credit climate.

"Some sanity is beginning to return to the marketplace," said Peter Cardillo, chief market economist at Avalon Partners. "M&A is still coming in; the market's fears of a credit crunch are probably overblown, due to the fact that there is a lot of global liquidity."

With less than one hour to go before the closing bell, the Dow Jones Industrial Average was 50.9 points higher at 13,413.2.6, with 19 of its 30 components ahead.

Dow component Hewlett-Packard Co. gained 2.4% after Bank of America started coverage of the firm with a buy rating. BofA also initiated coverage of Dow stock IBM , but offered a neutral rating, citing IBM's valuation. IBM was up 1.2%.

The S&P 500 was 1.35 points up, at 1,467.16, while the Nasdaq Composite advanced 14.13 points to 2,568.

BofA also initiated coverage of Nasdaq stocks Dell Inc. , Apple Inc. and Sun Microsystems Inc.

Fiserv Inc. said it would pay $4.4 billion in cash for CheckFree Corp. , helping assuage worries that a tightening credit market would hinder deals. "It does look like a credit crunch is on the horizon," said Cardillo. Fiserv's stock climbed 0.6%, while CheckFree advanced 23.5%.

Voluminous Volume

Trading volumes remained unusually high, contributing to the market's volatility.

At the New York Stock Exchange, trading volume hit 1.5 billion shares, with advancing issues topping decliners 9 to 7.

At the Nasdaq, nearly 1.9 billion shares exchanged hands, with advancing stocks running nearly even with those in the red.

"We're not seeing broad participation on up days and big volumes on down days," said Paul Nolte, director of investments at Hinsdale Associates. "The momentum peak was February, since then, we've been in a corrective mode."

"What we're seeing in the market is similar to the trends we've seen over the last several sessions - heightened volatility," said Mike Malone, trading analyst at Cowen & Co. "Investors are looking to sell on strength, but on the other hand there is some valuation support to the downside."

The market is likely to trade in a volatile, but range-bound fashion for the foreseeable future, both Malone and Cardillo said.

"The market is preparing itself for tomorrow's jobs report," said Cardillo of Friday's release of unemployment rate, which was expected to hold at 4.5%.

On Wednesday stocks locked in hefty gains at the conclusion of a hectic session that saw numerous reversals of course for the major averages. Market sentiment fluctuated between optimism about strong corporate and economic fundamentals and anxiety about shaky credit market conditions and rising energy prices.

Overseas calm

Thursday's session included soothing comments about lending and mortgage market conditions from executives at top European banks, including Barclays plc. , Credit Suisse Group and Societe Generale .

"Executives of large European banks make a number of reassuring comments re the subprime situation," said Charles Campbell, senior sales trader at Miller Tabak.

"In order for fears of spillover to be lessened, investors will most likely need a series of reassuring comments from public companies and strong reports on the economy," he said.

In Thursday's U.S. economic data, the Labor Department reported weekly jobless claims in the latest week rose 4,000 to 307,000, a level consistent with a healthy U.S. labor market.

And, the Commerce Department said demand for U.S.-made capital investment goods held flat in June, better than the previously reported 0.7% decline.

Yet the turmoil roiling the mortgage market resurfaced in a regulatory filing by Accredited Home Lnders Holding Co. , which said if it is unable to amend covenants with its lenders the resulting defaults would harm its ability to "continue as a going concern." Its shares, already down over worries about whether its $400 deal to be acquired by private-equity firm Lone Star is in jeopardy, were down 36.2%.

Penguin purchase

Shares of Nokia Corp. were nearly 8% higher. The company had a forecast-beating increased in quarterly profit and its highest operating margin in three years.

Viacom Inc. announced a decline in second-quarter profit, as results were hit by items, but strength in its filmed entertainment segment helped boost revenue for the media company. Earnings per share exceeded analysts' expectations. Viacom's shares gained 1.4%.

Starbucks Corp. stock were off .04% after the company reported an in-line 9% profit rise with 20% sales growth.

Walt Disney & Co. was up nearly 1% it reported a 5% profit rise and agreed to buy Club Penguin for $300 million.

Elmo recalled

Mattel's said its Fisher-Price unit said it will recall toys that contain hazardous levels of lead paint. Its stock fell 2.2%.

Shares of Unilever climbed 2.9% after the maker of Ben & Jerry's ice cream said sales for the year will hit the upper end of its target.

Both the Bank of England and the European Central Bank, as expected, didn't change interest rates.

Dollar, oil up

The dollar edged higher against the yen, extending gains from the prior session. In New York trade, the dollar was quoted at 119.17 yen, compared with 118.73 yen late yesterday. The euro stood at $1.3692, compared with $1.3667.

Treasurys ended solidly higher, with the benchmark 10-year Treasury note closing up 9/32 at 98 with a yield of 4.756%.

Gold futures closed up, with the contract for December delivery rising 70 cents to close at $676.60 an ounce. .

Crude-oil futures made modest gains, with crude for September delivery closing 33 cents higher, at $76.86 a barrel, on the New York Mercantile Exchange.

By Kate Gibson