Stocks end the trading day with minor gains

updated 4:09 p.m. ET July 9, 2009

NEW YORK - Investors showed a greater appetite for risk Thursday, putting money back into banking and industrial stocks as well as commodities. Stocks ended with modest gains.

Investors were encouraged by better-than-expected results late Wednesday from aluminum maker Alcoa Inc., which kicked off second-quarter earnings season and stoked hopes for more upbeat corporate reports to come.

The gains were tempered by weak sales reports from retailers and evidence that the labor market is still hurting. Major indexes rose less than 1 percent in afternoon trading.

Money moved into more economically sensitive sectors such as technology, banks and energy, which stand to gain more if a recovery takes hold, and out of defensive shares such as drug makers and utilities — a positive sign for a market that has been losing hope for a quick recovery.

After an ebullient rally in March and April that drove market indicators up as much as 40 percent, stocks started to falter in mid-June as several grim economic reports suggested that a recovery was much further away than anticipated. Major market indexes are down about 7 percent since June 12.

In other signs of willingness to take on more risk, Treasury bond prices fell sharply as their safe-haven appeal eroded, and a measure of stock market volatility fell.

According to preliminary calculations the Dow Jones industrial average rose 4.76, or 0.06 percent, to 8,183.17. The Standard & Poor’s 500 index rose 3.12, or 0.35 percent, to 882.68, while the Nasdaq composite index gained 5.38, or 0.31 percent, to 1,752.55.

Alcoa’s results were a pleasant surprise to investors who are looking closely for corporate earnings to bolster their now-fading hopes that the economy is on the mend.

Analysts expect the market to continue to drift until investors have a clearer picture from companies of where the economy is headed.

“A lot of people are sitting back, waiting to see if companies are making money,” said Tommy Williams, president of Williams Financial Advisors in Shreveport, La.

Despite the small gains Thursday, the market remains highly skeptical. There is plenty of evidence on hand, including weak retail sales and record high unemployment, to suggest any rebound in growth could be feeble and take longer than investors originally thought.

“I don’t see anything breathing yet,” said Steven Stahler, president of The Stahler Group in Baton Rouge, La., of the economy. “We can drift sideways for a long time. There are so many loose ends and so many unknowns.”

In other economic data Thursday, the Labor Department said the number of initial jobless benefits claims fell last week to 565,000 — the lowest level since early January and better than what analysts were expecting. However some of the improvement was due to changes in the timing of auto industry layoffs and the holiday-shortened week, and the number of continuing claims unexpectedly jumped to a record high.

U.S. retailers did little to help the bull case for the economy, reporting generally weaker monthly sales, with apparel sellers taking some of the biggest hits. Among the biggest disappointments were Limited Brands Inc., teen merchant Wet Seal Inc. and The Children’s Place Retail Stores Inc.

Bond prices fell, sending their yields lower. An auction of $11 billion of 30-year bonds did little to move the market. The yield on the benchmark 10-year Treasury note, a widely used benchmark for mortgages and other loans, rose to 3.41 percent from 3.31 percent late Thursday.

News moving the markets Nation’s retailers report weak June sales Alcoa loses $454 million in second quarter Weekly jobless claims drop unexpectedly Oil wavers near $60 as consumers scale back

Oil prices moved lower for a seventh straight day. Crude fell 22 cents to $60.36 a barrel on the New York Mercantile Exchange. A little over a week ago, crude prices stood at $73 a barrel. The falling price of oil has put pressure on markets around the world in recent days.

The dollar fell against other major currencies, while gold prices rose.

Overseas Thursday, Japan’s Nikkei stock average fell 1.4 percent. Britain’s FTSE 100 rose 0.5 percent, Germany’s DAX index gained 1.3 percent, and France’s CAC-40 added 0.5 percent.

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