By Msnbc.com staff and wire
Stocks were off their highs for the session entering afternoon trading Thursday, but the major indexes still posted healthy gains, helped by good reports on employment and home sales.
The Labor Department said seasonally adjusted initial claims rose 15,000 to 381,000 in the week that ended Dec. 24, up from a revised 366,000 the prior week. But the four-week moving average, considered a more accurate gauge of labor market trends, fell 5,750 to 375,000.
Pending sales of existing homes surged to a 1-1/2 year high in November, an industry group said on Thursday, offering more signs of a tentative recovery in the housing market.
The National Association of Realtors' Pending Home Sales Index, based on contracts signed in November, increased 7.3 percent to 100.1 – the highest level since April 2010.
Economists polled by Reuters had expected pending sales to rise only 2 percent. Pending sales lead existing home sales by a month or two. Recent data on home sales and construction have been fairly upbeat, suggesting an improvement in the sector, but prices continue to trend lower.
Approaching noon on Wall Street, the Dow Jones industrial average was up 0.87 percent. The S&P 500 was 0.80 percent higher. The Nasdaq rose 0.71 percent.
Rising Italian bond yields may be checking stocks’ gains.
Italian yields fell from recent record highs at a short-term debt auction, but yields for 10-year paper remained near 7 percent, a level near where other euro zone governments have been forced to seek bailouts.
Claims came in "pretty close to what was expected, and still under 400,000, so it isn't a surprise," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. He added that the data wouldn't have much influence on market direction in one of the most lightly traded weeks of the year.
"The only thing impacting trading right now is Europe. Everyone is watching Italy," he said. "It's the situation that won't go away."
Concerns over the euro zone sovereign debt crisis, which had receded recently, resurfaced Wednesday, sparking a 1 percent decline in major indexes. S&P 500 gains for the year were erased and the index pulled back below its 200-day moving average.
The selloff followed the euro's slide to an 11-month low against the U.S. dollar, prompted by worries over the debt crisis. On Thursday, the euro sank to its lowest since September 2010 against the dollar while the European Central Bank moved to support Italian bond markets.
"It's encouraging to see that yields have come in a bit, but it isn't indicative of a complete easing of the crisis in Europe," said David Katz, principal in charge of Weiser Capital Management's asset management division in New York.
"In a normal environment this would be having a bigger impact, but with volume so low I don't expect a lot to happen (in equity markets) until the end of the year."
Recent economic data, including reports on the housing market, have been largely positive, contributing to Wall Street gains over the past month and the view that economic growth is picking up steam.
Before Wednesday's selloff, the S&P had risen for five straight sessions, and some traders saw the index as overbought. Many investors were not expected to make large bets until after the New Year, and trading volume has been low because of the holidays.
U.S. stocks fell more than 1 percent on Wednesday putting the brakes on a hefty year-end rally. With the decline the S&P is now down 0.6 percent for the year, while the Nasdaq is down 2.4 percent. The Dow is up 5 percent.
Reuters and The Associated Press contributed to this report.