A rally in financial stocks Thursday helped the market extend its grind higher to a third day.
The Standard & Poor's 500 index cleared an important hurdle watched by traders when it closed just above its January peak to set a new 17-month high. That could bring some hesitant buyers into the market.
Financial shares rose after Citigroup Inc. CEO Vikram Pandit said the bank was on a path toward "sustained profitability" as it sells off risky assets. The bank has been the hardest hit by the financial crisis so the upbeat assessment helped boost expectations about the economy. The stock rose 5.6 percent.
The climb by financials helped offset concern about a spike in inflation in China. The country said its inflation rate rose to 2.7 percent in February from 1.5 percent in January. A steep rise in prices could force China to raise interest rates. That, in turn, could slow one of the world's fastest-growing economies and put a damper on a global recovery.
Jim Dunigan, managing executive of investments at PNC Wealth Management, said he expects that China will be able to contain prices for now.
"We'll see hints of inflation here and there but I don't think we'll see that problem for a while," he said.
In the U.S., the Labor Department said workers filing for jobless benefits for the first time fell by 6,000 to 462,000 last week. Economists were predicting a slightly bigger drop, according to Thomson Reuters.
The report showed some easing in the labor market, but it didn't point to the increase in hiring that investors want to see. Stocks have traded in a narrow range since the Labor Department said on Friday that employers cut fewer jobs in February than analysts expected. The market is looking for more signs of progress.
The week's quiet trading comes as investors look for more signs about the direction of the economy.
According to preliminary calculations, the Dow Jones industrial average rose 44.51, or 0.4 percent, to 10,611.84. It is down 1.1 percent from its recent high in Jan. 19.
The S&P 500 index advanced 4.63, or 0.4 percent, to 1,150.24, above its Jan. 19 close of 1,150.23. The index now stands at its highest level since Oct. 1, 2008.
The Nasdaq composite index rose 9.51, or 0.4 percent, to 2,368.46 for its sixth straight advance.
Bond prices were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was flat at 3.73 percent.
The dollar was mixed against other major currencies, while gold prices rose.
Crude oil rose 2 cents to settle at $82.11 per barrel on the New York Mercantile Exchange.
David Joy, chief market strategist at RiverSource Investments, said he was impressed that traders shrugged off the increase in China's inflation in a week with few economic reports. Investors often become uneasy when there is little new news. That can lead them to sell stocks.
"The concept of an economic recovery is garnering a little more credibility," he said. "We've arrived at a place where stocks are fairly valued."
The close above the January high by the S&P 500 index could give some of the investors sitting out of the market new incentive to pump money into stocks. The market slipped Monday and inched higher Tuesday and Wednesday. Volume has been light, a sign that traders have limited faith in the market's recent gains.
Corporate dealmaking continued. Oil company BP will pay $7 billion to acquire exploration rights from Devon Energy Corp. BP will acquire rights to explore in Brazil, the U.S. Gulf of Mexico and Caspian Sea.
Increased mergers and acquisitions in recent weeks has been a welcome sign that corporate leaders believe the economy is getting stronger.
Citigroup rose 22 cents, or 5.6 percent, to $4.18. It was a year ago this week, on March 10, 2009, that the Dow and the S&P 500 index began to pull off of 1-year lows after Citigroup said it had been making money.
Two stocks rose for every three that fell on the New York Stock Exchange, where trading volume came to 975.6 million shares, compared with 1.1 billion Wednesday.
The Russell 2000 rose 2.29, or 0.3 percent, to 677.22.
Britain's FTSE 100 fell 0.4 percent, Germany's DAX index slipped 0.1 percent, and France's CAC-40 fell 0.4 percent. Japan's Nikkei stock average rose 1 percent.