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Stocks end trading day with modest gains

By Samantha Bomkamp, Associated Press

Stocks held on to small gains Thursday after applications for unemployment benefits fell and several companies reported earnings that were better than Wall Street was expecting, including Bank of America and Morgan Stanley.

The Dow Jones industrial average rose 45.03, or 0.36 percent,  to 12,623.98. The Standard & Poor's 500 rose ended 6.46 higher, or 0.49 percent, to 1,314.50. The Nasdaq composite was up 18.62 points, or 0.67 percent, to 2,788.33.

"The market is screaming loud and clear," said Doug Cote, chief market strategist with ING Investment Management. "Prices have lagged fundamentals and now they're catching up."

Cote says the market's gains could accelerate as investors begin to focus more on economic fundamentals instead of worries about their exposure to risk. While investors have been focusing on global concerns, especially the European debt crisis, the U.S. economy is showing many positive signs, including better-than-expected corporate earnings and improvements in manufacturing and consumer spending.

As global risk factors subside, Cote predicts that markets will see "a strong snap-back rally" as droves of investors finally trust that the markets are in a sustained upward trend.

The number of people seeking unemployment benefits plunged last week to the lowest level since April 2008, the latest sign that the job market is strengthening. In other economic news, U.S. consumer prices were unchanged last month, a signal inflation is under control. In the housing market, a third straight increase in single-family home building in December was offset by a drop in apartment construction.

France and Spain also held successful bond auctions, easing worries about that region's two-year-old debt crisis.

Utilities companies were among the few industries to fall, an indication that investors are becoming more comfortable owning riskier stocks instead of parking money in relatively safe industry sectors.

Utilities, which were the best-performing stocks last year, tend to pay higher dividends and fluctuate less than companies like Caterpillar Inc. and FedEx Corp., whose fortunes are more closely tied to the economic cycle. Indexes tracking industrial and consumer discretionary stocks each rose 1 percent, the most of the 10 industries in the S&P 500 index.

In another sign that investors are shedding low-risk assets, the dollar and Treasury prices fell. The yield on the benchmark 10-year Treasury note rose to 1.97 percent from 1.90 percent late Wednesday.

Bank of America rose 2 percent and Morgan Stanley rose 5 percent after reporting results that were better than analysts had expected. BofA returned to profit in the fourth quarter while Morgan Stanley's loss was much less than forecast, thanks largely to better stock trading results.

Renewable Energy Group Inc., the nation's largest producer of biodiesel, was unchanged at $10 on its first day of trading. It was the first initial public offering this year.

Trading was halted in shares of photography icon Eastman Kodak after the company filed for Chapter 11 bankruptcy protection. The ailing company failed to find a buyer for its trove of 1,100 digital imaging patents.