Financial stocks rebounded on Thursday, helping to lead the broader market modestly higher after three days of losses.
The Dow Jones Industrial Average recently rose 65 points to 8563, recovering from a three-day slide in which it has shed more than 300 points. The S&P 500 was up 0.6% as its financial sector posted a 1.9% gain.
Banking stocks had led the market lower on Wednesday after President Barack Obama proposed a sweeping revamp of the financial regulatory system. But the sector's bellwether were back on their feet Thursday, with Bank of America and J.P. Morgan Chase gaining more than 2%. Goldman Sachs Group rose 1.6%.
Health-care stocks also pushed higher, extending a trend that has lasted most of the week. The S&P 500's health-care sector rose 2.3%, while Dow components Merck and Pfizer gained more than 3% each.
"Health care continues to do well on the premise all the legislation priced into the market won't be as bad or as timely as we thought it was going to be," said Burt White, chief investment officer for LPL Financial.
Economic data also supported the market. The number of workers filing new claims for jobless benefits rose slightly last week, while continuing claims fell by the most since November 2001, breaking a streak of 21 straight increases. The Federal Reserve Bank of Philadelphia said that mid-Atlantic manufacturers turned in their best performance since September in June.
White said he was encouraged by both the decline in continuing claims and the Philadelphia Fed survey, though he added there was nothing in either report that was "overly exciting."
The reports were the latest in a string of recent developments that have gradually shifted traders' attention away from the risk of inflation in the U.S. economy fueled by the government's bailout and stimulus spending.
"The risk of inflation is still out there, but it's not immediate by any means," said Peter Cardillo, chief market economist at Avalon Partners in New York. "Some of the fears we saw along those lines recently were really exaggerated."
Treasury prices were mostly lower, led by the long end of the yield curve, as traders looked ahead to another round of government debt auctions next week. The 10-year note was down 21/32, yielding 3.77% in recent trading. The dollar was stronger, rising against the euro and the yen.
Asian equity markets posted a mixed finish Thursday. Tokyo's Nikkei index fell 1.4%. Stocks in Europe rose despite disappointing retail-sales numbers out of the U.K.
-Geoffrey Rogow contributed to this article.
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