Stocks notched a modest gain Thursday as a Wall Street giant's assurance that it could weather credit losses overshadowed growing unemployment claims and loan delinquencies.
Shares dipped early in the session after the Labor Department reported a jump in initial jobless claims to a level not seen since September 2005 and the American Bankers Assn. reported that late payments on car, credit card and home-equity loans had climbed to a 15-year high.
But the market jumped into positive territory after the chief executive of Merrill Lynch said the company wouldn't need to raise capital.
Financial shares led the way in both directions. An index of banks, brokers and insurers in the Standard & Poor's 500 fell 1.4% before rebounding to close with a 0.4% gain.
Federal Reserve Chairman Ben S. Bernanke also encouraged investors Thursday when he told Congress that the Fed expected to recover most if not all of the $29 billion of loans it made to finance JPMorgan Chase's deal to acquire struggling Bear Stearns.
"I think that the desire to sell is coming off," said Thomas J. Lee, equity analyst at JPMorgan. The fact that the market has not been shaken by recent downbeat economic data "tells me that the recession is largely discounted."
The Dow Jones industrial average rose 20.20 points, or 0.2%, to 12,626.03.
Broader stock indicators also edged higher. The S&P 500 rose 1.78 points, or 0.1%, to 1,369.31, and the Nasdaq composite index gained 1.90 points, or 0.1%, to 2,363.30.
The Dow, which shot up nearly 400 points Tuesday, is up 7.6% from its 17-month low set March 10.
With a broad swath of corporate profit reports set to arrive in the coming weeks, investors appear upbeat. Over the last few weeks, the market has occasionally been knocked lower by disappointing economic readings, particularly relating to consumer spending, but it has ultimately righted itself on signs that the credit markets are improving.
"You're going to continue to see weak economic data. That doesn't mean stocks are going to come down," said Bill Stone, chief investment strategist for PNC Wealth Management.
Government bond yields fell slightly. The yield on the 10-year Treasury note edged down to 3.58% from 3.6% late Wednesday.
Oil prices declined after a surge a day earlier on the prospect of climbing demand for gasoline. Crude futures fell $1 to $103.83 a barrel on the New York Mercantile Exchange.
The dollar was mixed against other major currencies, while gold climbed back above $900 an ounce.
Merrill Lynch, which initially retreated 2.4%, rallied on the remarks by its CEO, John Thain. The stock closed up 55 cents, or 1.2%, at $45.89.
"We have plenty of capital going forward, and we don't need to come back into the equity market," Thain told a Japanese newspaper.
Retailing stocks in the S&P 500 lost 0.9% as a group, the biggest decline among 24 industries. Amazon.com slumped $2.43 to $74.94. Best Buy slid $1.41 to $42.53.
In other market highlights:
* Monsanto rallied $5.79 to $117.79 as the price of corn exceeded $6 a bushel for the first time and Credit Suisse boosted its projection of the company's earnings this year and next because of strong demand for its corn seed and weed killer.
* Schering-Plough surged $1.52, or 11%, to $15.38. The drug maker announced late Wednesday that it would cut jobs to offset continued sales declines of its cholesterol drug Vytorin. The stock had tumbled early in the week after medical researchers recommended less use of the drug.
* Cisco Systems dropped 73 cents, or 2.9%, to $24.23 after the stock was downgraded by an analyst who cited softening demand for the networking-equipment maker's products.
* Constellation Brands jumped $1 to $19.72 after the wine company's profit topped expectations on strong sales.
* Garmin slumped $3.60 to $52.81. The personal navigation device maker's finance chief forecast a drop in revenue in the first quarter from the fourth quarter.
* Research in Motion shot up $6.79 to $122.58. Strong subscriber growth and demand for smart phones more than doubled the BlackBerry maker's quarterly profit.
* Stock prices slipped in Europe. Key indexes fell 0.4% in Britain, 0.5% in Germany and 0.5% in France. But Japanese shares climbed 1.5%.