updated 6/5/2009 8:47:47 AM ET 2009-06-05T12:47:47

Traders are betting that an improving economy will reward banks and energy companies.

Major Market Indices

Stocks rose for the fifth time in six days Thursday after analysts raised their ratings on banks and oil prices rose again, making energy firms look increasingly attractive. Investors were also willing to take more chances on stocks after the government reported that the number of workers continuing to receive unemployment benefits unexpectedly fell for the first time in 20 weeks.

The drop in unemployment rolls, as well as in first-time claims for jobless benefits, gave investors another bit of hope that the economy is finding a more stable footing. The idea that the economy is halting its slide has driven a powerful rally that has lifted the Standard & Poor’s 500 index 39.8 percent in three months.

The data arrived a day ahead of the government’s monthly tally of job losses — often seen as the most important report on the economic calendar. The unemployment rate stood at a 25-year high of 8.9 percent in April and economists expect it will rise to 9.2 percent when the May report is issued Friday.

Investors are looking for any sign that unemployment is ebbing because that could help shore up consumer spending, retail sales and the housing market.

“Things seem to have stabilized and people are hunting for any sort of information they can get to determine the next move in the market and the economy,” said Jim Sinegal, equity analyst at Morningstar in Chicago.

The Dow Jones industrial average rose 74.96, or 0.9 percent, to 8,750.24. The broader Standard & Poor’s 500 index rose 10.70, or 1.2 percent, to 942.46, and the Nasdaq composite rose 24.10, or 1.3 percent, to 1,850.02.

The S&P and Nasdaq are at new highs for the year, and both are showing gains for 2009. The Dow is now down only 26 points for the year after having been in the red since early January.

Bond prices fell after the drop in jobless claims. Fewer worries about the economy made the safety of government debt less attractive. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.54 percent. The yield has been fluctuating recently as investors absorbed a mix of economic data.

The gains in financial and energy stocks offset mixed reports from retailers on their May sales.

Banks got a boost after RBC Capital Markets analysts said the worst of the financial crisis is over. The KBW Bank index, which tracks 24 of the nation’s largest banks, rose 4.8 percent.

KeyCorp. jumped 90 cents, or 19.6 percent, to $5.50 after an upgrade from RBC, while Goldman Sachs Group Inc. rose $7.32, or 5.2 percent, to $149.47 after a Bernstein Research analyst raised his rating.

The improved data on unemployment and a weak dollar helped push oil prices to fresh highs for the year. Oil and other commodities have been rallying on expectations that an improving economy will lift demand.

Light, sweet crude rose $2.83 to settle at $68.71 a barrel on the New York Mercantile Exchange after climbing as high as $69.56, its highest level since November.

That helped energy companies. Anadarko Petroleum Corp. rose $1.52, or 3.2 percent, to $48.57, while Occidental Petroleum Corp. advanced $1.75, or 2.6 percent, to $68.62.

Retailers including Macy’s Inc. and Abercrombie & Fitch Co. lost ground as traders worried that shoppers were still reluctant to spend. A year ago, sales benefited from government stimulus checks. Macy’s fell 44 cents, or 3.3 percent, to $12.88, while Abercrombie slid $3.75, or 11.8 percent, to $27.95.

The market’s surge this spring since hitting 12-year lows on March 9 has been driven by better-than-expected data. But investors are now looking for clearer indications that the economy is improving.

“If we’re on the cusp of a recovery and a convincing recovery, then the stock market makes all the sense in the world,” said Michael Darda, an economist with MKM Partners in Greenwich, Conn. “If it turns out there is no recovery until next year, then the market could run into some trouble.”

On Wednesday, investors sold stocks following weaker-than-expected reports on factory orders and the services industry.

Scott Jacobson, chief investment strategist at Capstone Sales Advisors in New York, said investors should be careful about expecting that the gains will continue to come.

“It’s too late right now to dump all your money into the stock market given where it is,” he said.

Investors are likely to remain focused on concerns like unemployment and the dollar. The greenback has fallen steadily since early March as investors’ appetite for riskier assets increased. A falling dollar can trigger inflation, hurting consumers’ buying power.

In other trading, the Russell 2000 index of smaller companies rose 8.97, or 1.7 percent, to 531.68.

About three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.4 billion shares compared with 1.3 billion traded Wednesday.

Last week, the 10-year yield surged to a six-month high of 3.75 percent on worries over mounting U.S. government debt loads. Investors are on edge because higher rates on mortgages and other loans could stall an economic recovery.

Overseas, Japan’s Nikkei stock average fell 0.8 percent. Germany’s DAX index rose 0.2 percent while Britain’s FTSE 100 and France’s CAC-40 each gained less than 0.1 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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