The Dow Jones industrial average closed above 10,700 for the first time in 15 months on Thursday as investors bet that the corporate earnings season would overcome a rocky start.
The advance was slightly uneven, with technology stocks rising ahead of quarterly earnings from chip maker Intel Corp. and financials climbing before a profit report from JPMorgan Chase & Co. due Friday. Safe havens like utilities and consumer staples stocks fell. The Dow industrials rose 30 points, and broader indexes also rose.
The results from Intel after the closing bell more than confirmed traders' hunch that things were looking up at the leading technology company. Intel's income, revenues and profit margins all came in well ahead of expectations.
The market got off to a good start after SAP, a major business software maker based in Germany, said its fourth-quarter revenue fell less than forecast. That provided some reassurance that companies are becoming more willing to invest in technology. Investors are also watching to see whether companies can bolster their earnings with solid revenues instead of just continuing to cut costs.
Anticipation that corporate earnings reports would turn around following a weak showing by aluminum maker Alcoa Inc. on Monday helped investors look past a mixed bag of economic news.
The Commerce Department reported that businesses increased their inventories by a larger-than-expected amount in November. The gain is a welcome sign for the economy and suggests that businesses are feeling more confident that sales will pick up. It was the second straight month that stockpiles rose after 13 months of drops.
The news on inventories helped offset weaker reports on retail sales and initial unemployment claims. Inventories rose by 0.4 percent, double the increase economists expected. Meanwhile the government also reported that retail sales fell 0.3 percent in December. Economists polled by Thomson Reuters had been expected an increase.
Dave Stepherson, portfolio manager at Hardesty Capital Management in Baltimore, said the retail sales report was disappointing, but not terribly surprising because of uncertainty still surrounding the job market.
"You're not going to get one until you get the other," Stepherson said. "It's sort of a catch-22."
The Labor Department said workers seeking unemployment benefits for the first time rose by 11,000 last week, more than economists had expected.
Investors are becoming accustomed to seeing jagged indicators on the economy and have generally not lost their cool on the occasional poor economic report. However, many analysts believe that there will need to be a meaningful pickup in job creation if a 10-month stock rally is to continue.
"The economy has already shown signs of improvement and in investors' minds the question is how much of that is already priced into the market," said Brian Lazorishak, portfolio manager at Chase Investment Council in Charlottesville, Va.
The Dow rose 29.78, or 0.3 percent, to 10,710.55, its highest close since Oct. 1, 2008. Even with a gain of 63.6 percent since March, the index is still down 24.4 percent from its record high of 14,164.53 in October 2007.
The broader Standard & Poor's 500 index rose 2.78, or 0.2 percent, to 1,148.46, and the Nasdaq composite index rose 8.84, or 0.4 percent, to 2,316.74.
Demand for the safety of government debt rose following the economic reports and strong demand at a Treasury Department auction of $13 billion in 30-year bonds. Treasury prices rose, pushing yields lower. The yield on the benchmark 10-year note fell to 3.74 percent from 3.80 percent late Wednesday.
SAP rose much of the day but ended down 23 cents at $50.16. Intel rose 52 cents, or 2.5 percent, to $21.48 and gained 1 percent in after-hours electronic trading following the release of its results.
JPMorgan rose 44 cents to $44.69.
The dollar was mixed again other major currencies. Gold rose modestly.
Crude oil fell 26 cents to $79.39 per barrel on the New York Mercantile Exchange.
Three stocks rose for every two that fell on the New York Stock Exchange. Volume, which has been light since late 2009, fell to 888.1 million shares compared with 969.7 million Wednesday.
The Russell 2000 index of smaller companies rose 2.87, or 0.5 percent, to 646.43.
Overseas markets rallied as investors became more comfortable with China's recent moves to tighten monetary policy. China is making the moves, such as forcing banks to hold more reserves, to discourage excess lending.
Britain's FTSE 100 gained 0.5 percent, Germany's DAX index and France's CAC-40 each rose 0.4 percent. Japan's Nikkei stock average rose 1.6 percent.