US stocks rose on Thursday as stronger-than-expected jobs and trade data helped lift optimism about the economic recovery, although sentiment was fragile as investors fretted over European banks. Financials, hit hard in the August downturn, were among top gainers as new US claims for unemployment benefits fell to a two-month low, while the trade deficit narrowed sharply in July. J.P. Morgan Chase & Co rose 2.5 percent to $40.10.
"The recovery is not falling apart and continued growth is the most likely outcome," said Zach Pandl, economist at Nomura Securities International in New York. "This is generally a bond negative and positive for stock prices." However, defensive sectors such as healthcare, utilities and telecommunications services were also among top gainers in a sign investors remain cautious. The S&P healthcare index rose 1.2 percent, with Pfizer Inc up 1.3 percent to $16.77.
Volume was light and trading volatile as some traders were off for the Jewish new year holiday in an already slow week shortened by Monday's Labour Day holiday. The Dow Jones industrial average gained 28.23 points, or 0.27 percent, to 10,415.24. The Standard & Poor's 500 Index rose 5.31 points, or 0.48 percent, to 1,104.18. The Nasdaq Composite Index added 7.33 points, or 0.33 percent, to 2,236.20.
Earlier, the S&P 500 touched a one-month high above 1,110 after data showed new claims for unemployment insurance fell to their lowest level in two months last week, while the US trade deficit narrowed sharply in July. But some expressed scepticism over the data as a Labour Department official said some states had been unable to submit claims in time because of the Labour Day holiday, resulting in the department's making estimates for them.
Deutsche Bank shares came under pressure on a Bloomberg report citing people with knowledge of the discussions saying the German bank had approached investment banks about managing a stock sale to raise as much as 9 billion euros ($11.4 billion). Deutsche Bank declined to comment, and it remained unclear whether it may need the capital to cover exposure to potential risky sovereign debt or was trying to increase its stake in Deutsche Postbank. Its shares fell 3.2 percent to $59.99 in New York.
"The Street seems to be confused about whether it's due to sovereign exposure or their take out of Postbank," said David Lutz, managing director of trading, Stifel Nicolaus Capital Markets in Baltimore. But helping shares in the US financial sector, veteran banking analyst Richard Bove said at least 17 US banks with more than $10 billion in assets could emerge as possible take-over targets. They included Zions Bancorp, up 2.6 percent to $20.31, and Capital One Financial up 0.8 percent to $39.40.
The S&P 500 has risen for six of the last seven sessions. Technical analysts continue to point to a bullish inverse "head and shoulder" formation in the index with a "neck line" at 1,130 that could signal a potential break out to around 1,250. "The frustrating sideways action in the S&P 500 and many developed markets belies a burgeoning build-up of bullish demand, which holds the potential to power prices significantly higher over the final stanza of 2010 and well into 2011," wrote Auerbach Grayson analyst Richard Ross in a research note.
Adobe Systems jumped 12.1 percent to $32.86 after Apple Inc said it is easing restrictions for building iPhone and iPad applications, a move that should allow for the use of third-party tools such as Adobe's Flash software. The Dow's gains were limited by McDonald's Corp, which dropped 2.3 percent to $74.37 after its August sales in Europe were softer than expected.
About 6.29 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, far below last year's estimated daily average of 9.65 billion. Advancing stocks outnumbered declining ones on the NYSE by a ratio of over 3 to 2, while on the Nasdaq, about 5 stocks rose for every four that fell.
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