U.S. Stocks Rise As Financials Offset Target's Lowered Outlook

NEW YORK (MarketWatch) -- U.S. stocks on Thursday stepped tentatively higher, led by financial shares as the market awaited the White House's plan to curb home foreclosures, while some downward pressure came from mixed retail sales results.

The gains came on the same day as the government's four-week moving average for jobless claims climbed to a level unseen since in more than two years.

The underlying trend is "consistent with the recent softening in the labor market," Omair Sharif, an analyst at RBS Greenwich Capital, wrote of the early jobless claims data.

The Dow Jones Industrial Average rose 26.2 points at 13,471.1, with 17 of its 30 components trading higher, led by a 3.6% rise by American Insurance Group Inc. shares.

Broader indexes gained as well, with the S&P 500 up 2.69 points at 1,487.7 and the Nasdaq Composite rising 8.73 points to 2,675.09.

Volume on the New York Stock Exchange passed 322 million, and advancing stocks outnumbered those declining 2 to 1. On the Nasdaq, 491 million shares traded hands, and advancers outpaced decliners nearly 2 to 1.

On the New York Mercantile Exchange, gold futures reversed earlier sharp losses to trade higher, recently up $3.50 to $807.2 an ounce, while Crude-oil futures gained 86 cents to $88.35 a barrel.

Jobless claims

The government reported its moving average for initial jobless claims hit its highest mark since late October 2005, with the seasonally adjusted four-week moving average for initial jobless claims up 4,750 to 340,250. .

On Friday, the government is slated to release its employment report.

"We expect nonfarm payrolls tomorrow to show a gain of 90,000, with an uptick in the unemployment rate to 4.8%," Sharif said in his commentary.

Target Corp. shares dropped 6% after the retailer said it expects December sales to be down "well short" of its prior view. In November, Target had predicted same-store sales would be down in the low single-digits.

The retailer also reported that November same-sales increased 10.8%, while on a calendar-adjusted basis, sales for the period increased 1.1%.

November same-store sales were mixed during a month of heavy promotions.

Wal-Mart Stores , Macy's and Costco Wholesale beat expectations, while Fred's cut its earnings outlook and Limited Brands sales fell more than forecast.

Elsewhere, the Organization of Economic Cooperation and Development said the U.S. will avoid a recession next year, though the housing problems will lead to a downturn.

Illustrating those housing woes, the Mortgage Bankers Association on Thursday reported foreclosures hitting new highs in the third quarter, with the rate of loans in the foreclosure process at 1.69% of all outstanding, up from 1.4% in the second quarter. .

Later, President Bush is expected to detail his administration's plan, devised with input from mortgage lenders and banks, to freeze interest rates for as long as five years to help some subprime borrowers.

The Bank of England joined the Bank of Canada in making an interest-rate cut this week. The European Central Bank held steady and kept rates at 4%.

"This is the first time in two years they have cut and is further evidence that the credit crisis is global," Kevin Giddis, an analyst at Morgan Keegan & Co. Inc., said of the BOE's move.

Overseas, European shares fell back as investors factored in the rate cut, although a strong update from the royal Bank of Scotland lifted banking stocks. .

The dollar was mixed, gaining on the yen but erasing gains against the euro and pound.

By Kate Gibson