Investors' cautious optimism about the job market gave stocks a modest lift Thursday, one day before the government's report on December employment.
Stocks closed mostly higher after many retailers issued upbeat holiday sales figures and the Labor Department reported a leveling of the number of newly laid-off workers applying for unemployment benefits.
The Dow Jones industrial average and the Standard & Poor's 500 index closed at new 15-month highs, while the Nasdaq composite index edged lower.
Stuart Schweitzer, global markets strategist at J.P. Morgan's Private Bank in New York, said markets have been in a holding pattern as traders looked to Friday's jobs report from the Labor Department. Analysts are expecting job losses will shrink from the 11,000 lost in November, though some economists expect the economy to add jobs.
"Everyone is waiting for the fireworks," Schweitzer said.
He predicted investors would take in stride a modest loss or gain in jobs, but that any number well outside expectations could cause worries about a slide in the economy or, conversely, that rapid growth would risk triggering inflation.
"It's a case of not too hot and not too cold, but somewhere in the middle," he said.
The government reported a slight rise in claims for unemployment benefits, though the increase was less than expected. The Labor Department said initial claims rose by 1,000 last week. A four-week average of claims is at its lowest point since September 2008 and nearing the point where economists say the economy will begin to create jobs.
Meanwhile, upbeat December retail sales reports and increased forecasts lifted some retailers. Shoppers spent a little more over the holiday season, though consumer spending is expected to be weak amid continuing high unemployment and tight credit.
Sears Holdings Corp., which operates Kmart and Sears, Roebuck and Co., eked out a small gain and offered a fourth-quarter forecast that was sharply above analysts' estimates. Others, including Macy's Inc. and Limited Brands Inc., boosted their profit expectations.
The Dow rose 33.18, or 0.3 percent, to 10,606.86. The broader S&P 500 index rose 4.55, or 0.4 percent, to 1,141.69. It was the highest close for both indexes since Oct. 1, 2008.
The Nasdaq fell 1.04, or 0.1 percent, to 2,300.05.
Three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 1.2 billion shares, compared with 1.1 billion Wednesday.
Bond prices were little changed. The yield on the benchmark 10-year Treasury note was unchanged at 3.83 percent, compared with late Wednesday.
The dollar rose, and gold fell. A gain in the dollar weighs on commodity prices by making them more expensive for overseas buyers. That hurts energy and materials companies.
Crude oil fell 52 cents to $82.66 per barrel on the New York Mercantile Exchange.
Thursday's reports come as investors hunt for more evidence of economic strength to sustain a 10-month bull run in the stock market. Trading in recent days has offered few clues about the direction of the markets in 2010 as investors held back ahead of the jobs report. A stubbornly high unemployment rate remains one of the biggest drags on the economy, and investors are still waiting for hiring to rebound before concluding that a true recovery has taken hold.
Among retailers, Sears jumped $10.31, or 11.6 percent, to $99.18, while Macy's rose 39 cents, or 2.3 percent, to $17.49. Limited slipped 31 cents to $18.76.
Homebuilder Lennar Corp. said orders rose during its fiscal fourth quarter for the first time in more than three years. Buyers were taking advantage of lower prices and federal tax credits. The company also reported a profit as it benefited from an income tax adjustment. Its shares rose $1.76, or 12.3 percent, to $15.46.
The Russell 2000 index of smaller companies rose 4.02, or 0.6 percent, to 641.97.
Some overseas markets fell after China took steps to limit lending and prevent its economy from overheating. Traders fear the moves could affect economic growth around the world.
Britain's FTSE 100 fell 0.1 percent, Germany's DAX index lost 0.3 percent, and France's CAC-40 rose 0.2 percent. Japan's Nikkei stock average fell 0.5 percent.