Stocks edged higher yesterday. Investors, encouraged by better-than-expected results from aluminum maker Alcoa Inc., put money into stocks they recently avoided: commodities producers, banks and industrial companies.
Money also moved into more economically sensitive industries such as technology and energy, which stand to gain more if a recovery takes hold. And it came out of defensive shares such as consumer staples and health-care stocks - a positive sign for a market that has been losing hope for a quick recovery.
The gains were tempered by weak sales reports from retailers and evidence that the labor market is still hurting.
The Labor Department said yesterday the number of initial jobless benefits claims fell last week to 565,000 - the lowest level since early January and better than what analysts were expecting. However, some of the improvement was due to changes in the timing of auto industry layoffs and the holiday-shortened week, and the number of continuing claims unexpectedly jumped to a new high.
U.S. retailers did little to help the bull case for the economy, reporting generally weaker monthly sales, with apparel sellers taking some of the biggest hits.
Destination Maternity Corp., for example, said its same-store sales fell 10.7 percent in June, partly hurt by a calendar shift and unfavorable weather. Same-store sales - sales at stores open at least a year - are considered a key indicator of a retailer's health.
Excluding the calendar shift, same-store sales dropped 10.1 percent for the month. There was one less Sunday and one more Tuesday than the prior-year period.
The Philadelphia maternity apparel retailer also said its monthly sales were hindered by a weak retail environment, difficult year-ago comparisons, and less opportunity for promotions due to lower inventory levels.
Analysts expect the stock market will make little headway until investors have a clearer picture from companies of where the economy is headed. Second-quarter earnings reports are just starting, and will begin to come out in earnest next week.
The Dow Jones industrial average rose 4.76, or 0.1 percent, to 8,183.17, the second day of modest gains after a 161-point drop on Tuesday. The blue chips crossed zero 108 times during trading.
The broader Standard & Poor's 500 index rose 3.12, or 0.4 percent, to 882.68, while the Nasdaq composite index gained 5.38, or 0.3 percent, to 1,752.55.
Even with investor caution, a widely followed indicator known as the fear index, the Chicago Board Options Exchange's Volatility Index, remained at relatively low levels. The VIX, as it's called, fell 4.9 percent to 29.78. It's down 25.6 percent in 2009 and its historical average is 18-20. It reached a record 89.5 in October at the height of the financial crisis.
Oil prices rose after six days of selling. Crude rose 27 cents to settle at $60.41 a barrel on the New York Mercantile Exchange. A little over a week ago, crude prices stood at $73 a barrel. Falling oil had been pressuring markets around the world in recent days.
Alcoa fell 23 cents to $9.23. After trading ended Wednesday, the aluminum producer said it lost $454 million during the second quarter, but that was below Wall Street's expectations. Investors read Alcoa's report with the hope that companies had weathered the worst of the recession.
In other trading, the Russell 2000 index of smaller companies slipped 0.41, or 0.1 percent, to 479.27.
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